Following Credit Suisse's losses in the wake of the Archegos Capital scandal, European banks are feeling smug about the fact that their systems follow Basel III/IV rules more closely and regulators are more diligent than in the US. However, a new paper, titled "Liquidity Dependence and the Waxing and Waning of Central Bank Balance Sheets," has suggested that the same features of US banking fragility that seem to stem from prior quantitative easing (QE) are also evident in the UK. The report indicates these features include a shift from time to sight deposits and poses the question of whether the UK is too complacent.
Improved internet connectivity is set to become a lasting legacy of the COVID-19 pandemic in Canada's cottage country, accelerating a movement of remote workers to rural properties. Cottage prices soared during the pandemic, with many people buying as an isolation retreat, but the expected return of workers to offices combined with lower prices will help more residents balance long-established local communities. Royal LePage anticipates the price of single-family homes will drop by 5% to CAD603,060 ($493,000) by 2023, with interest in rural property expected to persist even as business leaders push for the return of remote workers to continue after the pandemic.
India's central bank has withdrawn INR2,000 ($24) notes from circulation for exchanging or depositing at banks after widespread alarm about financial stability. The bank has not officially clarified how long these notes will remain as legal tender. The RB1 had brought in the notes as a temporary measure in 2016 to boost cash supplies and issued them to replace the INR500 and INR1,000 denominations. Prime Minister Narendra Modi reportedly invalidated INR500 and INR1,000 notes overnight to counteract "black money".
Brinkmanship surrounds discussions over the US debt ceiling and technology firms become a battleground in geopolitics according to Reuters markets editor Mike Dolan. A hard deadline of 1 June remains to raise the federal debt limit and the likelihood of being able to collect enough revenue to bridge to 15 June is “quite low”. Nine days remain to reach a deal between bipartisan politicians before the US faces a cash crunch that could endanger a possible technical default on short-term debts. Sanctions over technology companies between China and the West continue as the G7 summit showed conflicting positions on Western relations with China.
Mizuho Financial Group has agreed to acquire US investment bank Greenhill & Co for $15 per share, in a deal worth $550m. The sale will help the Japanese bank expand its financial business in the US. Greenhill went public almost 30 years ago and was a pioneer in the boutique M&A arena. However, shares in the firm have struggled amid stiff competition from larger rivals in recent years. Greenhill will be housed within Mizuho's existing banking division and led by the current head of banking for the Americas, Michal Katz.
Activist investors are submitting record numbers of shareholder proposals for Japanese companies as Tokyo Stock Exchange pushes for better valuations. The number of proposals submitted for this year’s shareholder meetings has risen 60% from last year. Investors including Aya Murakami and Oasis Management’s Seth Fischer say the Tokyo Stock Exchange’s campaign to improve valuations is serving as a tailwind for their own efforts. Bourse operator Japan Exchange Group announced in January that it will urge companies that trade below book value to release plans to boost share pricing. The Topix index, Japan’s benchmark equity index, is at its highest since 1990.
The financial crisis has shifted corporate finance in Europe, with more firms using capital markets instead of banks for fundraising purposes. In the US, the majority of corporate debt is made up of bonds, while bank loans dominate in Europe. The latest presentation from Apollo's Torsten Sløk reveals that bank loans for US corporate funding dropped from 39% in 2008 to 23% in 2019, while bank loans in Europe have decreased from 86% in 2008 to 77% in 2019; the European bond market share has increased from 13% to 22%. Europe will continue to rely more heavily on banks than the US, but their role will decline.
JPMorgan's CEO, Jamie Dimon, will discuss the bank's future growth plans at its investor day conference on Monday. Although the bank has had a strong year, becoming one of the US's largest deposit holders with over 4,800 branches, the bank must try and maintain its momentum heading forward. Mr. Dimon is not expected to step down in the near future, but potential successors include Marianne Lake and Jennifer Piepszak. Nevertheless, shareholders may ask about Anglo-Irish investigation JPMorgan is embroiled in over its ties to Jeffrey Epstein and a failed $175m acquisition of fintech startup Frank. They could also ask about JPMorgan being barred from buying more lenders after angering Washington with its purchase of First Republic.
Bank that bought Silicon Valley Bank sues HSBC for poaching staff
CBC
23-05-22 18:38
First Citizens BancShares has filed a lawsuit in San Francisco federal court which claims that HSBC illegally hired over 40 Silicon Valley Bank (SVB) employees to launch its own US venture banking business while breaching federal law. The lawsuit accuses HSBC of violating the law and poaching the employees to gain access to trade secrets held by SVB, which included vital information about firms in the tech and health-care sectors. Meanwhile, HSBC has recently announced that it will axe global bonuses and suspend pay raises.
Some senior officials in the London insurance and reinsurance market have warned that slow regulators and crudely drawn rules are causing it to lose ground. The global share of London's insurance market is now under 8%, stagnating over recent years, according to the London Market Group. It argues that issues include “a one-size-fits-all” regulation that creates undue administrative pressure and the slow pace of signoffs for regulatory authorisations. The group is calling for regulators to publish a comparative analysis of the UK versus other regions and for new metrics to identify issues more readily.
JPMorgan Chase is set to increase its investment in new initiatives by more than $15bn over the next two years, as the bank aims to grow its already considerable operations. The bank earned $12.2bn in the final quarter of last year and expects to increase this to $81bn in 2023, a figure bolstered by its recent acquisition of First Republic. Although the outlook is positive, JPMorgan is preparing for the possibility of future interest rate hikes, which would undermine its already-heavily-squeezed profit margins.
First Citizens Bank & Trust has sued HSBC in a federal court in northern California, alleging that the lender poached 42 bankers from Silicon Valley Bank two weeks after First Citizens acquired it earlier this year. The lawsuit claims that HSBC took "confidential, proprietary, and trade secret information" belonging to Silicon Valley Bank to orchestrate the move and accuses a former SVB employee, David Sabow, of being "the chief architect of this scheme". HSBC has declined to comment on the lawsuit.
Finance ministers in African countries are facing "impossible choices" between serving debt, keeping schools open, and paying civil servants. A severe cost of living crisis afflict the continent, into which 62m people were plunged into poverty since the beginning of the Covid pandemic. There have been some initiatives to improve matters, but they are inadequate compared to the needs of the region, which requires over $1tn annually. A summit next month in Paris presents an opportunity to address the situation, and the author suggests three policies that could help: providing more liquidity, improving debt-restructuring processes, and giving African countries more voting rights at the IMF.
UK Chancellor Jeremy Hunt is meeting with food manufacturers to call on them to help ease pressure on household budgets amid rising food prices, which the Resolution Foundation suggests will overtake energy prices as the biggest source of pressure on family finances. The UK government has rejected the idea of imposing price controls or requesting that supermarkets cap the prices of certain essentials. The chancellor will also look at reforms to pricing rules to enable consumers to compare product prices more easily. Bank of England officials reportedly do not believe that “greedflation” is responsible for high inflation in the UK.
First Citizens, the new owner of failed Silicon Valley Bank (SVB), is suing HSBC and various former employees for more than $1bn, alleging they planned a scheme to strip SVB's confidential information and top bankers. The lawsuit claims that HSBC and a former senior SVB banker co-ordinated the scheme, dubbed “Project Colony”, to strip the “core of [SVB’s] profitability engine”. HSBC has not yet commented on the allegations.
The US dollar has surged to a six-month high against the Japanese yen as expectations grow that rates across the US will remain stronger for longer. The impasse surrounding the debt ceiling has also weighed on risk sentiment. A number of Federal Reserve policy makers spoke on Monday and many hinted that the central bank still has further to tighten monetary policy. Minneapolis Fed President Neel Kashkari said that US rates may have to go above 6% for inflation to return to the central bank's 2% target.
China has launched Swap Connect to allow more overseas investors access to its interest rate swaps market, hoping it can offset ongoing local debt sales as US rates rise, while also broadening its integration with global finance. Many view the programme as necessary for foreign investors using Hong Kong’s Bond Connect scheme. However, most do not see this offering as a solution to the outflows of Chinese government debt, which have reached RMB903bn ($130bn) since the start of 2018.
The Bank of England is hoping that a big decline in the official rate of CPI inflation for April will alleviate fears of persistently rapid price rises. Six out of ten people in the UK thought it would take at least a year to return inflation to what they thought was normal, according to an Ipsos Mori survey of 29 countries from May. The figures reflect concerns that the UK is seeing prices and wages rising upward, which will make inflation stay higher for longer. The Bank of England predicts that inflation will return to its 2% target around the end of 2024 or the start of 2025.
As the effect of previous sanctions on the Russian economy fade, new measures are being prepared which will have a marginal impact on Europe’s need for Russian energy, but seriously bite the Kremlin. Sanctions to stem exports of goods have seen a 28% reduction during Q2 2015 while the latest poll of economists suggests GDP will stagnate this year after falling 2% in 2014. Further sanctions may focus on energy imports including a ban on liquefied natural gas (LNG) and lowering the $60-a-barrel price-cap on Urals crude. Some of the EU also want to extend sanctions to countries that help Russia evade them, however, the question of whether or not tougher sanctions make for political sense is the issue under consideration. Regardless, the fall in Russia’s share of EU exports to 2% from 4% last year, suggests Russia no longer matters for Europe.
Morgan Stanley CEO James Gorman is retiring having successfully reshaped the bank by pushing into managing money for wealthy clients. His bold approach helped reduce the bank’s reliance on volatile markets and deal-making, with revenue becoming bigger and more stable and the return on tangible common equity increasing from 10% in 2010 to 16% in 2022. Gorman’s strategy of acquisitions, such as E*Trade and Eaton Vance, has seen Morgan Stanley pay$6.2bn in fines, compared with Goldman Sachs’ $12.5bn. Morgan Stanley’s share prices increased faster than both Goldman and Lazard since 2010.
