Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

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Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

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Euro suffers worst month against the pound since financial crisis

Political risks are still all the rage in the currency markets. The euro has suffered its worst slump against the pound since 2009 in November, as investors hone in on a series of looming battles between eurosceptic populists and establishment parties at the ballot box. The single currency has shed 4.5 per cent against sterling […]

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RBS falls 2% after failing BoE stress test

Royal Bank of Scotland shares have slipped 2 per cent in early trading this morning, after the state-controlled lender emerged as the biggest loser in the Bank of England’s latest round of annual stress tests. The lender has now given regulators a plan to bulk up its capital levels by cutting costs and selling assets, […]

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China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

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Archive | November, 2016

Litany of ifs and buts on Europe’s banks

Posted on 27 August 2013 by

By Patrick Jenkins

The jitters have started to show – banks’ bad loan provisions have been hiked, cash calls have been launched.

    Over the past few months, banks and their national supervisors – from London to Ljubljana – have begun bracing for the European Central Bank’s imminent induction as the lead regulator of the eurozone’s biggest lenders.

    Within a matter of weeks, assuming legislative go-ahead, the ECB is expected to establish its new “single supervisory mechanism”, hiring the 1,000 staff it will need to police the banks, and making its mark with a tough root-and-branch Asset Quality Review (AQR) to determine how truthful banks are being about the loans on their balance sheets.

    The parameters of the review have yet to be finalised but officials expect the broad outline to be communicated to the banks by October, with the process completed by the end of March next year.

    Properly done, the exercise could quickly establish the ECB as a tough regulator and help restore investor faith in Europe’s lenders. A succession of botched stress tests over recent years and laggardly recapitalisation of troubled lenders have deterred investors from backing the sector.

    A credible AQR, followed immediately by a stress test to show how balance sheets would stand up to further trouble, would, it is hoped, convince the world that Europe’s lenders are as resilient as US banks okayed by the Federal Reserve’s annual Comprehensive Capital Analysis and Review (CCAR).

    All of which explains the flurry of preparations. Italy’s Intesa SanPaolo has been the most upfront about its desire to be ready for the ECB process. This month the bank revealed a “conservative” 30 per cent increase in the amount it has set aside to cover bad loans, undertaken explicitly “in the light of the [ECB’s] asset quality review”. Rival UniCredit took a similar stance soon after, both apparently encouraged by Italy’s central bank.

    A similar trend was evident at Spain’s banks where bad loan ratios jumped by 20 per cent on average, partly as a result of further economic deterioration but also, seemingly, anticipating a more stringent view of what constitutes a bad loan.

    The ECB exercise is set to implement new pan-European definitions of non-performing loans, standardising an NPL as anything that is 90 days past due, and also forcing banks to categorise all exposures to a single borrower as non-performing, even if only one of a number of loans is actually in default. Special attention is likely to be paid to real estate loans, old pre-crisis structured finance portfolios and other troubled areas such as German shipping finance, officials say.

    Autonomous, an independent research house, predicts the changed definitions could increase problem loans by an average of 40 per cent – forcing weaker banks to raise fresh capital. Lenders in Germany, Austria and France could face the biggest shocks in the AQR.

    Capital raising has already begun in parts of Europe. In Austria last month
    Erste Bank raised €660m of fresh equity. Local rival Raiffeisen is now weighing a cash call of its own to raise a projected €2.5bn. This week, the Slovenian government said it would inject fresh capital into troubled banks on the back of an ongoing domestic asset quality review.

    Not to be left out, just because it happens to be a non-eurozone country, the UK has also been trying to get ahead of the game too. The Prudential Regulation Authority recently conducted a capital assessment and asset quality review that prompted two big initiatives – a £1.5bn recapitalisation at the Co-op, and a £5.8bn rights issue at Barclays.

    There may well be other cash calls this year as banks try to pre-empt the conclusions of the ECB exercise and make the most of an upbeat stock market.

    But a litany of ifs and buts still hangs over the whole process. Most immediately, it is still uncertain whether the EU will deliver the legal go-ahead to empower the ECB next month. More fundamentally, there is still disagreement about how to deal with a bank if it fails to plug a capital shortfall under its own steam.

    Here, too, Europe must learn from the US, where the government’s Tarp scheme injected capital as necessary back in 2009. For the ECB exercise to work, the sovereign-focused European Stability Mechanism must become a bank bail-out vehicle of last resort. Germany, hamstrung until now by upcoming elections, must end its resistance to the idea once the September 22 poll is over – as must its like-minded Nordic neighbours. If it does not, Europe will squander its best chance yet to rehabilitate a banking sector that is crucial for the region’s economic revival.

    Patrick Jenkins is the FT’s banking editor.

    Blavatnik wins $50m in JPMorgan lawsuit

    Posted on 26 August 2013 by

    Len Blavatnik, the billionaire investor, has won a claim for breach of contract in a lawsuit against JPMorgan Chase, delivering a fresh blow against a bank at the centre of a legal firestorm.

    A judge in New York State Supreme Court on Monday awarded Mr Blavatnik $50m in damages, finding that JPMorgan had breached its investment guidelines when it invested $1bn of his money, some of it in subprime mortgage-backed securities which later incurred substantial losses. He had claimed $100m.

      “I hope that this decision sends a clear message to JPMorgan that they have to honour their obligations to their clients,” said Mr Blavatnik. “There are a lot of people out there who, I understand, feel they have been wronged by JPMorgan but cannot afford to take on a huge bank. They shouldn’t have to.”

      His case was one of a small number brought by individual investors alleging wrongdoing by banks during the financial crisis. The decision comes as JPMorgan is reeling from lawsuits and investigations by US authorities over allegations of misconduct, ranging from the “London whale” trading debacle to manipulation of commodities markets.

      Mr Blavatnik’s CMMF vehicle parked $1bn with JPMorgan in 2006 with a mandate to invest no more than 20 per cent in mortgage securities.

      But the bank “intentionally increased CMMF’s aggregate portfolio of mortgage backed securities from the ‘up to 20 per cent’ . . . sought and obtained in negotiations to an entirely unintended ‘up to 60 per cent’ of the portfolio”, Judge Melvin Schweitzer found.

      JPMorgan argued that the securities in question were placed correctly in a separate category of “asset-backed securities”. But the securities were backed by home equity loans which the court found should have placed them as mortgages.

      However, the judge found against Mr Blavatnik in his claim for negligence. The bank “made an error of judgement, that is all, and this alone is not sufficient to establish a breach of duties owed to CMMF as its investment adviser”, the judge wrote in his ruling.

      JPMorgan said: “We are pleased the court rejected CMMF’s negligence claims and found that our investment professionals lived up to their responsibilities. We respectfully disagree with the court’s interpretation of our agreement with CMMF and are considering our options regarding that finding.”

      David Elsberg, attorney at Quinn Emanuel, who represented Mr Blavatnik, said the decision was a “decisive” victory and the judge’s rejection of JPMorgan’s assertion that it classified the securities correctly because they used an industry standard may “have implications for investors” wanting to bring similar suits.

      Mr Blavatnik, whose business interests span Warner Music and chemicals group LyondellBasell, had said the bank took on too much risk with an account that was supposed to be a cash management account.

      The bank had replied that it was “simply wrong” to say it had ever been risk free and that the mortgage securities that incurred losses had been regarded as a conservative investment choice until the financial crisis.

      MPs press for break-up of RBS

      Posted on 26 August 2013 by

      A logo from a Royal Bank of Scotland branch is seen reflected in a window in the City of London©Reuters

      MPs are stepping up their campaign for a break-up of Royal Bank of Scotland amid suspicions in Westminster that RBS and Treasury officials will try to scupper a good bank-bad bank split.

      In a letter in Tuesday’s Financial Times, the influential Parliamentary Commission on Banking Standards has said it is “important for all the options for [RBS’s] future structure to be examined as a matter of urgency”.

        George Osborne, chancellor, has ordered a report this autumn on whether hiving off old toxic loans into a state-owned bad bank would speed up RBS’s recovery and help it increase business lending.

        The idea is backed by Lord King, former Bank of England governor, and Lord Lawson, former Tory chancellor, and was proposed as an option by Andrew Tyrie’s cross-party banking commission.

        But those close to the RBS inquiry – being undertaken by its advisers Rothschild and Blackrock – say it has so far thrown up little evidence that the bank’s lending capacity is being constrained by troubled assets on its balance sheet.

        Both RBS and some Treasury officials would be delighted if the inquiry were to reject a split, which they believe would be complex and unnecessary at a time when the bank and the economy are showing signs of recovery.

        The move by Andrew Tyrie, chair of the Parliamentary Commission on Banking Standards, reflects fears that an impending report will deliver what the Treasury wants and reject the creation of a bad bank.

        “It is crucial that Rothschild approach this important work with a good deal of independence of mind,” Mr Tyrie said.

        The banking commission – whose members include Lord Lawson and Justin Welby, archbishop of Canterbury – warns Mr Osborne against letting “formal accounting conventions” get in the way of a sound decision.

        They admit that “on some treatments, recorded public debt may rise” if a bad bank was created – the same methodology was used by the Office for National Statistics when Northern Rock was split along similar lines.

        “The chancellor’s review also needs to examine whether, over time, the taxpayer may in fact be better off as a result of a split,” Mr Tyrie’s commission writes.

        It is crucial that Rothschild approach this important work with a good deal of independence of mind

        – Andrew Tyrie, chair of the Parliamentary Commission on Banking Standards, in a letter to the FT

        Mr Osborne has said he is agnostic on the idea of a split. His aides say he told Rothschild to conduct a thorough inquiry and that there were no “right or wrong” answers.

        However, his Treasury officials have consistently shared the analysis of Stephen Hester, outgoing bank chief executive, that the upheaval is undesirable and would hold up reprivatisation.

        One halfway house could involve an enlargement and rebranding of RBS’s existing “non core” division as a kind of “internal bad bank”, bankers said.

        That entity has been winding down the worst of RBS’s assets for the past four years, with the original £258bn set to fall to £40bn by the end of 2013. As much as £130bn of further assets, including commercial property loans and the troubled Irish subsidiary Ulster Bank, could be moved into the unit.

        RBS said three weeks ago that its lending to small and medium-sized enterprises fell “slightly” to £33bn in the three months to the end of June, though data from the British Bankers’ Association last Friday suggested this was an industry-wide trend.

        Bazin set for the top job at Accor

        Posted on 26 August 2013 by

        Accor Hotel©AFP

        Accor is likely to name Sébastien Bazin as its latest chief executive at a board meeting on Tuesday, signalling a more aggressive strategy for Europe’s largest hotel chain by sales, according to people close to the situation.

        Mr Bazin, who has been at Los Angeles-based private equity firm Colony Capital for 16 years, will take the helm of a company that has seen significant turnover of its executive ranks. He will be Accor’s fourth chief executive since 2006, including Yann Caillère, the current interim chief executive.

          Accor’s board has been bitterly divided over how aggressively to pursue an “asset lite” strategy that involves managing and operating hotels rather than owning or leasing them. Mr Bazin is expected to speed up Accor’s hotel disposal programme.

          There have also been divisions between its minority private equity stakeholders, including Colony and France’s Eurazeo with a combined 21.6 per cent equity stake, and other board members, according to one person with knowledge of the matter.

          The appointment of Mr Bazin, who has most recently been running Colony’s Europe real estate investment unit, could spark a backlash in France against what is seen as American vulture capitalism.

          Accor’s share price has lagged behind competitors since the start of 2008. Some investors say the underperformance owes much to the fact that it owns more properties and has a heavier capital spending burden than rivals such as InterContinental Hotels, the person with knowledge of the matter added.

          The previous head of Accor, Denis Hennequin, left in April. Mr Hennequin had been head of McDonald’s Europe before joining the hotel group in December 2010, chosen by the board because of his experience at a franchise operation such as a fast-food chain.

          Mr Bazin, a French national, joined the board this year. The board considered a short list of six candidates before turning to him, this person added.

          Mr Bazin is expected to focus on Accor’s profitability and its brand strength as he reshapes the hotel group’s portfolio. He will also need to keep in mind obligations to employees, unions and other constituencies.

          Colony claims it has been a value-added investor and a good citizen in France, where it controlled the Paris Saint-Germain football team before selling it to the Qataris, and Château Lascombes, a French vineyard that was sold in 2011 to French pension funds.

          Tom Barrack, Colony’s founder, has said that he, like many other opportunistic American property investors, will increasingly focus on Europe in the coming months. He has already invested €4bn in the region and plans to put in another €5bn in the next two years.

          The changes at Accor come with the hotel industry broadly in flux, and pressures in Europe, where the bulk of Accor’s hotels are located, particularly intense. More and more hotels are eliminating once basic services such as room service or even check-in desks.

          Italian mood hit by political tensions

          Posted on 26 August 2013 by

          Italy’s FTSE MIB underperformed the broader pan-European FTSE Eurofirst 300 on Monday after renewed political uncertainty hit the country’s share market.

          The implications of Silvio Berlusconi’s conviction for tax fraud and his political party’s response have sparked fears of a period of political uncertainty that could threaten the ruling coalition. Italian government debt prices have fallen in response, pushing yields higher on the 10-year bonds by 1.1 basis points to 4.33 per cent.

            The FTSE Eurofirst ended flat at 1,223.52, while the FTSE MIB index fell 2.1 per cent to 16,977.76. Shares in the former prime minister’s business empire were among those worst hit.

            Mediaset, the Berlusconi-controlled broadcaster, publisher and advertising group, fell 6.3 per cent to €3.15.

            Banks were also sharply lower, with UniCredit down 3.5 per cent to €4.42 and Intesa Sanpaolo off 3.3 per cent to €1.51.

            Shares in KPN gained 3 per cent to €2.33 after América Móvil, which owns 30 per cent in the Dutch telecoms group, gave its backing to the sale of KPN’s German unit E-Plus to Telefónica Deutschland.

            Carlos Slim, the Mexican billionaire who owns América Móvil, gave an “irrevocable commitment” to vote in favour of the sale after Telefónica sweetened its bid to €8.55bn, from its initial €8.1bn offer.

            Ryanair, the Irish budget airline, eased 0.8 per cent to €6.71 in Dublin after regulatory authorities in the UK said they were considering the company’s stake in Irish rival Aer Lingus Group.

            The Competition Commission may force Ryanair to sell all, or part of its 29.8 per cent stake in Aer Lingus after it said earlier in the year the market for flights between Ireland and the UK was distorted because of the holding.

            Shares in French drugmaker Sanofi were helped by the results of a clinical trial that showed its Fluzone High-Dose vaccine was more effective at treating influenza in elderly patients than its standard dose Fluzone treatment. Shares in Sanofi were up 2.3 per cent to €76.65.

            CFO of Zurich Insurance found dead

            Posted on 26 August 2013 by

            The chief financial officer of Zurich Insurance has died, the Swiss company has said.

            Pierre Wauthier, who had been in charge of the Swiss group’s finances since 2011, was found dead at his home on Monday morning.

              Vibnu Sharma, who is currently Zurich’s group controller, will take over as chief financial officer on an interim basis.

              Martin Senn, chief executive, said: “The board of directors, group executive committee and all of our colleagues are deeply saddened and pass on our condolences to the family and relatives.”

              Zurich, which is Switzerland’s biggest insurance company, added in a statement on Monday that police were in the process of investigating the “exact circumstances” surrounding Mr Wauthier’s death.

              “Out of consideration for the family no further details have been disclosed,” the company said.

              Mr Wauthier, who was born in 1960, joined Zurich in 1996 as its corporate credit and investment risk manager.

              Over the next 15 years, he worked his way up the ranks, serving in a variety of positions, including as head of investor relations and as CFO at the group’s Farmers division.

              The dual British and French national had previously worked at JPMorgan and the French ministry of foreign affairs and held a law degree from the Sorbonne as well as a degree in international finance from l’Ecole des Hautes Etudes Commerciales in Paris.

              BATS-Direct Edge merger creates NYSE rival

              Posted on 26 August 2013 by

              US stock trading is set to be dominated by three companies after BATS Global Markets and Direct Edge agreed a merger that will make the combined exchange operator a rival to the New York Stock Exchange and Nasdaq.

              Financial terms of the tie-up announced on Monday were not disclosed but the merger will create the second-largest US stock exchange operator by volume and a potential challenger in the highly profitable listings and market data businesses.

                The companies are also eyeing global opportunities, with BATS already in charge of the largest pan-European stock exchange and Direct Edge in the process of expanding to Brazil.

                The deal marks the most high-profile consolidation of a host of new trading venues backed by banks and large brokers that were created after US regulators tried to foster competition to the two biggest exchange operators, NYSE Euronext and Nasdaq OMX.

                It will also allow the companies to consolidate expensive technology used to power their four US equity exchanges with BATS’ proprietary systems, reducing operation costs and lowering fees for the banks and brokers that rely on its systems to trade shares.

                The merger comes as IntercontinentalExchange prepares to complete its $10bn acquisition of NYSE Euronext, making Nasdaq the only leading equity exchange operator not involved in a significant merger.

                The combined company will be run by Joe Ratterman, chief executive of BATS, and will be based out of Kansas City, Missouri, where it was founded eight years ago by a high-frequency trading firm. William O’Brien, head of Direct Edge, will be president of the new company, which will operate under the BATS name.

                Mr O’Brien said: “I’ve seen the logic in this transaction for years. We’re in a period now where our customers need exchanges to do more for them as volume is down significantly from the financial crisis and all our customers are trying to do more with less.”

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                BATS and Direct Edge are owned by consortiums of investment banks and high-frequency trading companies including JPMorgan Chase, Goldman Sachs and KCG Holdings, which hold stakes in both. Equity houses across Wall Street have been slashed as trading volumes and profits have plummeted in recent years, leading many brokers to search for alternatives to trading at NYSE and Nasdaq.

                Using cutting-edge technology and cheaper trading fees, BATS and Direct Edge have each carved out an 11 per cent market share of US equities trading. That would put a merged exchange ahead of Nasdaq, which has an 18 per cent share, and slightly behind NYSE’s 23 per cent, according to industry data.

                There are no plans to reduce the number of exchanges run by the companies when the deal, which requires regulatory approval, is expected to close in the first half of next year.

                “The benefit for the customers will come from a single technological interface,” said Mr Ratterman, who added that he was tracking developments in the Canadian and Japanese equity markets for possible expansion opportunities.

                BATS was advised by Broadhaven Capital Partners and Direct Edge was advised by Bank of America Merrill Lynch and Evercore Partners.

                Sentiment bearish across bond land

                Posted on 26 August 2013 by

                The message from the US government bond market remains clear: caveat emptor.

                When disappointing US economic data, such as July’s 7.3 per cent plunge for durable goods, results in only a modest rebound for Treasury prices, it illustrates the strength of bearish sentiment across bond land.

                  Since selling erupted in May as the market began pricing in the Federal Reserve’s intention to start reducing its bond purchases, the benchmark 10-year yield has made a series of new highs and failed to attract the type of significant buying that would establish a long term top is in sight.

                  It appears investors believe a rise above 3 per cent is only a matter of time and heading into the final week of August, the clock is running.

                  With the 10-year yield currently camped around 2.8 per cent, bond traders are watching whether the benchmark will end the month above a critical bullish level of 2.7 per cent that has held since June 2007.

                  Starting September above this key mark would suggest a long term bear trend is firmly in place as the market awaits a signal from the Fed that it could begin tapering bond purchases next month.

                  Once that decision is made, policy clarity from the Fed may stabilise the bond market, but shorter dated yields, which are tied more closely to expectations of future rate hikes, have not escaped the recent sell-off.

                  Some of the weakness seen in two-, and five-year yields reflects emerging market countries defending their currencies and selling their holdings of short term Treasury debt.

                  A bigger risk is that the bearish sentiment across the bond market is only building, with emerging market strains and uncertainty as to who will assume leadership of the Fed next year not helping calm the waters.

                  When the taper starts, it naturally compels forward-thinking bond traders to focus on the next big defining trend, the moment when overnight lending rates will normalise.

                  Nationwide puts SME loans on hold

                  Posted on 26 August 2013 by

                  The logo of the Nationwide Building Society sits on a sign outside one of the company's branches in London, U.K., on Thursday, Nov. 24, 2011. Nationwide Building Society, the U.K.'s largest customer-owned lender, said pretax profit rose 17 percent after the company issued more mortgages and increased its consumer business through credit cards and personal loans.©Bloomberg

                  Nationwide, the UK’s largest building society, has delayed its launch into the small business banking market until 2016, dealing a blow to the government’s efforts to boost lending to these customers.

                  The mutual has put on hold its plans to start offering loans to small- and medium-sized enterprises as it battles to meet tougher capital requirements set out by the financial regulator earlier this year.

                    Faced with demands to boost its leverage ratio – a measure that relates capital to overall loans – to 3 per cent by 2015, Nationwide has had to be more selective about how it invests in the business, according to people with knowledge of its plans.

                    It has opted to focus on increasing its market share of current accounts – to a target 10 per cent, compared with the current 5.7 per cent – rather than funding a push into SME lending.

                    Nationwide started developing plans to enter the SME market at the end of 2011, with a view to doing so this year. People familiar with its ambitions said the group was now unlikely to launch a full SME service before 2016 – after the deadline for meeting the new leverage ratio.

                    The delay will come as a disappointment to the government, which has been trying to push the banks to lend more to small businesses. Last year George Osborne, the chancellor, told the Treasury select committee that Nationwide was considering entering the SME market, a move he said would increase competition.

                    Nationwide said: “We have previously said that it is our strategic intention to enter the SME banking market and that we will do this at the right time for the Society and its members. This remains our intention going forward”.

                    The tougher capital demands are not the only factor in Nationwide’s decision to postpone the SME launch. Graham Beale, chief executive, previously indicated that he wanted to improve the mutual’s existing banking systems and infrastructure and boost its profitability before moving into this area. He also said he would only take such a step if market conditions were suitable.

                    The delay could reignite tensions between the government and regulators over how best to foster the economic recovery.

                    Last month Vince Cable, business secretary, accused the “capital Taliban” in the Bank of England of holding back the recovery by imposing excessive financial burdens on banks.

                    His comments came after the Prudential Regulation Authority revealed that Nationwide would have to strengthen its capital position after it fell short of the required 3 per cent leverage ratio.

                    Mr Beale warned that having to meet the new requirement quickly would constrain lending.

                    Three weeks later the PRA agreed to give Nationwide until 2015 to meet the new rules, a deadline Mr Beale expects to hit by organic means – largely by retaining a greater share of earnings. Nationwide has benefited in recent months from a reduction in savings rates across the retail market, which has helped boost its profit margins.

                    UK markets regulator rejects EU guidance

                    Posted on 26 August 2013 by

                    The new UK markets supervisor has for the first time rejected formal EU guidance on financial regulations this summer, adopting alternative rules that favour bankers and brokers.

                    The Financial Conduct Authority, which opened in April, has broken publicly with the formal EU interpretation of two different rules in the past three months, in moves which City experts have linked to the government’s recent tougher stance on Europe.

                      Lawyers described the shifts as significant milestones coming as the UK seeks to minimise the negative impact on the City of financial regulations.

                      “The decision by the FCA to publicly break ranks … is an important departure that must have been sanctioned at the highest levels,” said Nicola Higgs, a solicitor with Ashurst. “The detrimental impact of some European measures on London has been limited.”

                      In late May, the FCA formally rejected the direction on tough new short selling rules issued by the European Securities & Markets Authority. The FCA’s version allowed banks that buy and sell over-the-counter derivatives to seek a market-maker exemption, while Esma did not.

                      Germany, Denmark, France and Sweden also rejected part of the short selling guidelines. The French explicitly said they were not complying “in order to avoid competition distortion” caused by looser rules elsewhere.

                      Then on August 15, the FCA announced it had also declined to follow a European Commission interpretation of the alternative investment fund managers directive. The EU said fund managers cannot offer both AIFM services and brokerage services under the EU’s markets in financial instruments directive (Mifid) on a cross-border basis, but the FCA disagreed.

                      The FCA and the Treasury each downplayed a possible split with Europe on financial regulation. They noted that the AIFMD and the short-selling regulation were unusually controversial when adopted and that the AIFMD was passed as a directive so the UK has more freedom to stray from the EC interpretation.

                      “The FCA is fully engaged with Esma’s policy work, and carefully considers each guideline on a case-by-case basis. We have fully complied with all but one of guidelines issued to date,” an FCA spokeswoman said.

                      An Esma spokesman said individual member states are legally entitled to disagree as long as they explain their reasoning, which the UK has done.

                      But several London bankers and investment managers linked the FCA’s changed attitude to the government’s tougher stance on Europe.

                      “There is a lot of political pressure from Whitehall for pushback against Europe and a view that the UK has to look after itself,” said one banker who declined to be identified.

                      Some in the City say they hope the UK will also reject other EU guidance, including the European Banking Authority’s tougher than expected rules on new EU bonus restrictions.