Chillin' out till it needs to be funded
The European markets have in general been independent of UK’s actions throughout recent history. But as global investment banks get pipped to the post after a horrendous second life in the US markets came to an end in 2008, FSA and OFT’s actions are keeping banks and related markets at ransom in the US and in emerging markets in India and China. Apart from football hooligans and generally out of work masses, Bobbies are the other quintessential non gambling Britons that have always been at the back of one’s mind, courtesy Enid Blyton and Noddy, ever glad to help out neighbors and furtive and insistent on making everything to small town scale even if it is London/Business. Competition commission apart, Industry actions have always been subject to closer supervision despite the deemed capitalism or the known NATO friendly military acts of the UK government.
This note may otherwise explain our non chalance towards all crises emanating from the continent of Europe in general as well even as $16 bn worth of Chinese exports drown the EU and other continental committees of commission and omission and Hungary manages to closes plans cutting its deficit by 50% almost overnight to 3.8%
There has not been much business in London since early last year with Corporate debt down 20% globally and the rising interest in the non available stock of such debt raising JPM’s heckles (Read Tom Lee’s comments on the debt market at nytimes/Reuters) The corporate debt business losses apart banks and PE / Hedge fund operators in London have also suffered from multiple attempts at reviving the UK IPO market and the exit of HSBC to Cantonese districts of the Commonwealth. While Barclays, RBS and Lloyds have reported healthier balance sheets, the CIB business of Deutsche Bank, also much dependent on London’s rule of law, looks healthy despite uncertain exposures to the bovine Caja Surs, the clubby Landesbanks and the sovereign debts of Greece and Ireland.
However, such business has come at a cost of super taxes which yielded $220mn in Q4 for Deutsche Bank alone and continuing minute attention to detail interfering with international regulation like Basel or international accounting IFRS standards being reinvented by local Bobbie for British reporting. Minute differences in European law in fact allowed Lehman to build the Repo 105 transactions which were caught on the accounts of Citi, BofA and HSBC as well in London for End period transactions.
The British form however remains the weakest link despite its seeming hand in keeping Britain afloat, looking like it intends to keep the industry shaky for an even longer time so that people from Tesco and Virgin seem at home with other experts in creating and running a bank, with the help of the local Bobby
It is obvious that the other businesses of Stock lending are going to take longer to recover and with the lost appetite of investors any IPOs give larger opportunities to underwriters to bring income to the bank(s) whether originally from London or elsewhere as also in fact in most cases underwriters pick up significant investment to offload at a later stage for super profits ( much like the US and UK treasury)
The Office of Fair trading established in 2002 ( read the act at OPSI.gov.uk on Enterprise Act) seems to have evinced the interest of these banks that are insiders in the underwriting club but as it includes the likes of JP Morgan and MS that are truly well informed and carrying large pieces of such investment home, one wonders about the objectives of the TBA investigation of anticompetitive practices by Large investment Banks in London. The OFT charter includes checks on individual powers, removal from public office and by its charter obliged to put all its enforcement activities up front 60 days in advance of its annual plan apart from its charter of checking and allaying activities of cartelization.
It will be an interesting 4-6 weeks for the Director General appointed officers to go through the Underwriting club’s business and find bureaucratic delays more germaine to its world view from the island.
Current OFT Business
The Office of Fair Trading is in the middle of scaling down overdraft charges at banks, as high as GBP 152 or $210 per account which was in fact struck down by the British Courts as outside the purview of OFT’s powers. It is also investigating the P&G purchase of Sara Lee in the UK with a negative bias, and can cancel the purchase. It is investigating Virgin for pricing collusion with Cathay Pacific
[Tags UK, Competition Commission, OFT, Investment Banking, Britain, Europe]