Capital Markets, Financial

BGC Partners eyes new platform to trade US Treasuries

BGC Partners plans to launch a new platform to trade US Treasuries early next year, in a bid to return to a market in the middle of evolution, according to people familiar with the plans.  The company, spun out of Howard Lutnick’s Cantor Fitzgerald in 2004, sold eSpeed, the second-largest interdealer platform for trading Treasuries, […]

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Financial

Sales in Rocket Internet’s portfolio companies rise 30%

Revenues at Rocket Internet rose strongly at its portfolio companies in the first nine months of the year as the German tech group said it was making strides on the “path towards profitability”. Sales at its main companies increased 30.6 per cent to €1.58bn while losses narrowed. Rocket said the adjusted margin for earnings before […]

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Currencies

Renminbi strengthens further despite gains by dollar

The renminbi on track for a fourth day of firming against the dollar on Wednesday after China’s central bank once again pushed the currency’s trading band (marginally) stronger. The onshore exchange rate (CNY) for the reniminbi was 0.28 per cent stronger at Rmb6.8855 in afternoon trade, bringing it 0.53 per cent firmer since it last […]

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Currencies

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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Property

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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Categorized | Banks

Tit-for-tat banking rules are a retrograde step


Posted on November 22, 2016

Mervyn King, the former Bank of England governor, observed that global banks tend to be “international in life but national in death”. In the immediate aftermath of the financial crisis, the answer appeared to lie in global co-operation. Now, national regulators are increasingly inclined to assert control — even at the risk of duplicating international requirements.

The latest example of this is a proposal by the European Commission that would force large foreign banks with subsidiaries in the EU to hold additional capital and liquidity. If adopted, it would significantly increase the costs of EU-based business for American investment banks such as Goldman Sachs and JPMorgan. The measure is a retaliation against similar US rules, forcing foreign lenders with large US operations to ringfence capital there, in order to protect US taxpayers from the costs of any future bailout.

On the face of it, this move to level the playing field is understandable. The whole point of the post-crisis drive for international standards was to ensure that banks held enough capital in a central pot, overseen by their home regulator. There was no overt justification for the US rules, which imposed large costs on Deutsche Bank in particular. Their imposition was symptomatic of the continued fragility of the global financial system — which has contributed to a breakdown in trust between regulators.

The threat of tit-for-tat regulations is part of a broader transatlantic disagreement over the so-called Basel IV reforms to the international rules on bank capital. These are intended to stop banks gaming the system — limiting their ability to rely on their own internal models to measure their risks, and so their capital needs. European banks complain that the new approach would unfairly penalise them, because it fails to take into account differences between European and US banking markets. The EU’s financial stability chief, Valdis Dombrovskis, has threatened to disregard new Basel rules if they force the EU’s embattled banks to raise more capital.

The US has repeatedly been guilty of imposing its own standards and dictating international rules that it does not always feel bound to implement. The Basel rules may not take enough account of the big national variations in banks’ business models, especially when it comes to the differences between the US and European mortgage markets and small-business lending.

Despite all this, the commission’s approach is retrograde and short-sighted. The best way to guard against inadequate regulation spilling over from one country to another is to improve global co-operation, not to impose costly overlapping requirements. The commission is unlikely to achieve even the more narrow concern of protecting the EU’s financial sector. European banks suffer from stagnant home markets, backlogs of non-performing loans and structural challenges of low interest rates and unfavourable demographics. None of these problems will be solved by shielding them from US rivals.

If it acts on its threat, the commission will merely give US banks a reason to scale back their European operations — closing down any that are underperforming and relocating parts of their international business that could as easily be based in less capital-intensive jurisdictions. This might be welcomed by their immediate competitors. But it would not resolve the troubles of Europe’s banking sector, and the resulting loss of jobs and revenues would be to the detriment of the European economy.