Banks

BoE stress tests: all you need to know

The Bank of England has released the results of its latest round of its annual banking stress tests and its semi-annual financial stability report this morning. Used to measure the resilience of a bank’s balance sheet in adverse scenarios, the stress tests measured the impact of a severe slowdown in Chinese growth, a global recession […]

Continue Reading

Economy

Draghi: Eurozone will decline without vital productivity growth

It’s productivity, stupid. European Central Bank president Mario Draghi has become the latest major policymaker to warn of the long-term economic damage posed by chronically low productivity growth, as he urged eurozone governments to take action to lift growth and stoke innovation. Speaking in Madrid on Wednesday, Mr Draghi noted that productivity rises in the […]

Continue Reading

Currencies

Asia markets tentative ahead of Opec meeting

Wednesday 2.30am GMT Overview Markets across Asia were treading cautiously on Wednesday, following mild overnight gains for Wall Street, a weakening of the US dollar and as investors turned their attention to a meeting between Opec members later today. What to watch Oil prices are in focus ahead of Wednesday’s Opec meeting in Vienna. The […]

Continue Reading

Banks, Financial

RBS emerges as biggest failure in tough UK bank stress tests

Royal Bank of Scotland has emerged as the biggest failure in the UK’s annual stress tests, forcing the state-controlled lender to present regulators with a new plan to bolster its capital position by at least £2bn. Barclays and Standard Chartered also failed to meet some of their minimum hurdles in the toughest stress scenario ever […]

Continue Reading

Banks

Barclays: life in the old dog yet

Barclays, a former basket case of British banking, is beginning to look inspiringly mediocre. The bank has failed Bank of England stress tests less resoundingly than Royal Bank of Scotland. Investors believe its assets are worth only 10 per cent less than their book value, judging from the share price. Although Barclays’s legal team have […]

Continue Reading

Categorized | Banks

Goldman Sachs quits R3 blockchain consortium


Posted on November 21, 2016

Goldman Sachs has left the powerful R3 blockchain consortium, in a sign of tensions emerging as the big banks try to place their chips on a technology that could cut tens of billions of dollars of costs from the financial sector.

The Wall Street bank had been one of nine original members of R3, which was assembled last year to find ways to eliminate the clunky processes that govern payments and settlements behind the scenes. The group has since swelled to more than 70 fee-paying members, with the recent addition of Synchrony, the credit card company, Dutch bank ABN Amro and Fifth Third Bank of Ohio.

Goldman baulked at being asked to chip in for a $150m “Series A” funding round, according to two people familiar with the negotiations. One said that Goldman was unwilling to invest alongside dozens of co-investors, and wanted more operational control.

In a statement, R3 said: “As with any project of this scale and scope, we always expected the make-up of the consortium to change over time. Developing technology like this requires dedication and significant resources, and our diverse pool of members all have different capacities and capabilities which naturally change over time.”

Goldman declined to comment on its withdrawal, except to confirm that it was no longer paying dues to R3 as of the end of October.

Blockchain works as an electronic ledger of payments that is continuously maintained and verified in “blocks” of records. The ledger is shared between parties on computer servers and protected from tampering by cryptography, doing away with the need for a central authority.

Its supporters believe the technology could cut hidden expenses in the financial system by eliminating inefficiencies and the need for trade insurance, across areas such as payments, trade finance, syndicated loans and equity clearing. Such cost savings would be welcomed in an era of ultra-low interest rates, heightened capital requirements and tougher regulations.

But R3 is not the only group developing blockchain technology. Others include Digital Asset Holdings, run by Blythe Masters, the former JPMorgan head of commodities, which is working with the Australian Securities Exchange to move its clearing and settlement system on to blockchain.

Goldman joined a funding round for DAH in February 2016 along with IBM, bringing the total raised to $60m among 15 companies.

Another blockchain developer is Symbiont, run by Caitlin Long, a former managing director at Morgan Stanley, which is working on a project with the state of Delaware to change corporate law to enable company registrations on blockchain.

R3 has grown to a staff of more than 100 people and describes itself as the “de facto centre of gravity” for blockchain technology in the wholesale financial markets.

Charley Cooper, managing director at R3, said the group could shrug off the loss of Goldman, as it was just one of 73 companies in the consortium. He stressed that bringing more banks on board was a critical element of R3’s strategy.

“How good would a fax machine be if you had no one to communicate with?” he said. “The power of this technology is in the network effect; the multiplier is really profound.”