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Thursday, 01 March 2012 20:21

What are hedge funds?

Published in News and Views
Tuesday, 28 February 2012 10:52

Economic incentives for immoral behaviour

Provocative clip from the 70s explaining why law and morality are two different things.

Examples including:

Britain in the 18th,19th and 20th century. Bootlegging and prohibition in the 1920s and why no one considers it's wrong to violate foreign exchange controls.



Published in News and Views

Overview

After the nadir of the banking crisis of 2008, the business of banking is undergoing massive change as governments and regulators strive to return stability to the banking system and avoid the future provision of taxpayer support to failing banks.  

The multiple issues raised by the crisis are converging into one core and very fundamental question: what will be the future shape of the banking business in the developed world?  Faced with a raft of untested new initiatives, uncertainty over the direction and effectiveness of bank regulation, a potentially very uneven global playing field, the possibility of drastic restructuring, and the prospect of much reduced profit levels, banking is facing a very challenging future. Add to the mix the impact of this 'new normal' of profitability on investor sentiment with its increasing appetite for risk, and the need to nevertheless operate in a political climate of public anger and retribution, and you have a unique set of conflicts that mean that banking is facing a perfect storm of uncertainty and threat.

But one thing is certain: bankers, investors and others need to plan now for the future, and key strategic decisions to ensure a sustainable future have to be made. The Future of Banking after Global Reregulation defines and analyses the core issues, balances and weighs  conflicting views, and assesses likely impacts and outcomes to provide unique and insightful strategic input in troubled times.

Published September 2012
ISBN 978-1-907720-29-1
100 pages
For full contents in PDF format, click here
For the FREE Executive Summary,  click here

PDF UK £29.99 + VAT/ €35.90 + VAT/ RoW $47.00

The Future of Banking - PDF £35.99 Add to Cart

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Key issues


Key strategic issues addressed by The Future of Banking after Global Reregulation include:

•   Corporate governance: To what extent can the traditional elements of corporate governance, in particular boards of directors, play a role in mitigating future threats to banking stability? What has been the actual record of such governance in the recent crisis? Has banking become too complex and fast moving for these individuals?
•   New supervisory and regulatory measures: How likely are such measures such as the new Basel III, coupled with national legislation such as Dodd-Frank in the US and the creation of new regional entities in the EU, to significantly improve the identification and resolution of individual bank and systemic problems?
•    Strategic measures being taken or considered by bank management to reduce risk:  For example, what might be the future profile of investment banking and other high-risk businesses in the light of the possible application of the Volcker rule and similar measures to separate them from those supported by taxpayers?
•    The outlook for reconciling loss mitigation and achieving satisfactory investor returns:  How confident is the industry regarding the future of risk mitigation, and what are the key variables in this effort? What are the major gaps or issues to be addressed in the loss mitigation effort? How likely is a satisfactory resolution of the investor/regulatory dialogue at a return on investment acceptable to both sides?
•    Case studies of success in bank risk management:  While considerable attention has been paid to failures in bank risk management, a number of banks have demonstrated sustained success in reconciling the regulatory and public interest in banking safety with investors’ need for earnings growth and satisfactory return on capital. The report examines in detail such success stories across a number of business models and geographies as well as the lessons to be drawn from them.

The study provides a balanced, composite view of the considerations involved in this strategic planning. In a rapidly evolving process of global re-regulation, it assesses the impact of what has been agreed, what is still to be agreed, and provides an indication of the likely future outcomes.

Contents


PREFACE

EXECUTIVE SUMMARY
Corporate governance
New supervisory and regulatory measures
Strategic measures to reduce risk
Case studies of success in bank risk management
Views on the outlook for re-regulation
Research participants

CHAPTER 1:  THE CORE ISSUES ADDRESSED BY RE-REGULATION
1.1  More – and ‘better’ – capital
1.2  The central importance of government support to failing banks
1.3  Creating an appropriate resolution regime to avoid taxpayer funding
1.4  Too Big To Fail
1.5  The issue of bank funding
1.6  A level bank playing field: super-equivalence and other global regulatory issues

CHAPTER 2: THE EFFECTIVENESS OF CORPORATE GOVERNANCE IN BANKING
2.1  The purpose of corporate governance
2.2  The effectiveness of governance in practice
2.3  Possible means of improving corporate governance
2.4  Summary of corporate governance

CHAPTER 3:  GLOBAL RE-REGULATION: A WORK IN PROGRESS
3.1  Global measures: capital adequacy and liquidity
3.1.1  Capital adequacy
3.1.2  Liquidity
3.2  National measures: resolution regimes
3.2.1  Resolution regimes: the ring-fencing solution
3.3  Summary of global re-regulatory measures

CHAPTER 4:  STRATEGIC RESPONSES TO DATE BY THE BANKS
4.1  Macro developments across the banking sector
4.2  The transformation of the investment banking business
4.3  Changes in retail banking
4.4  The role of banks versus non-banks  
4.5  Summary of strategic responses by the banks

Chapter 5:  SUCCESS STORIES IN RECONCILING INVESTOR EXPECTATIONS AND BANKING SAFETY
5.1  Introduction
5.2  BNP Paribas
5.2.1  Business model
5.2.2  Risk management
5.2.3  Strategy evaluation  
5.3  JPMorgan Chase
5.3.1  Business model
5.3.2  Risk management
5.3.3  Strategy evaluation  
5.4  Banco Santander
5.4.1  Business model
5.4.2  Risk management
5.4.3  Strategy evaluation  
5.5  Standard Chartered Bank
5.5.1  Business model
5.5.2  Risk management
5.5.3  Strategy evaluation  
5.6  Svenska Handelsbanken (SHB)
5.6.1  Business model
5.6.2  Risk management
5.6.3  Strategy evaluation  
5.7  Toronto Dominion Bank
5.7.1  Business model
5.7.2  Risk management
5.7.3  Strategy evaluation  
5.8  Wells Fargo
5.8.1  Business model
5.8.2  Risk management
5.8.3  Strategy evaluation  

CHAPTER 6: THE LIKELY EFFECTIVENESS OF THE NEW REGULATORY MEASURES
6.1  The value of more capital and new liquidity rules
6.2  The issue of regulatory uncertainty
6.3  Does re-regulation go too far?
6.4  Focus on adverse consequences
6.5  The new regulations don’t solve the basic problems
6.6  Summary of effectiveness of the new regulations

CHAPTER 7: OUTLOOK FOR THE FUTURE
7.1  It is too early in the re-regulation process to make many sound observations
7.2  The trend toward basic retail and commercial banking
7.3  Banking will lose its share of the overall financial sector to non-banks active in risk-taking
7.4  The ideal of a level regulatory playing field in banking is unrealistic
7.5  Differentiation of strategy and returns will be a feature of the new banking environment
7.6  Views for the future of banking

CHAPTER 8:  CONCLUSIONS
8.1  Increasing the effectiveness of corporate governance
8.2  The ‘new normal’ profitability of banking and its consequences for bank investors and bank strategies
8.3  Lessons from the case studies
8.4  The outcome of efforts to restructure banking
8.5  Effective supervision: the missing link

BIBLIOGRAPHY

LIST OF FIGURES

Figure 1.1:    The evolution of core capital
Figure 1.2:    Comparative default/failure rates, 1990–2009
Figure 1.3:    The three pillars of banking wisdom
Figure 1.4:    Growth in banking system assets relative to GDP, 1990 to date
Figure 1.5:    Funding: European bank senior bonds vs. non-financial corporates, 2005 to date
Figure 3.1:    Net stable funding ratio
Figure 3.2:    Net stable funding ratio by region (%)
Figure 3.3:    Ring-fencing – in the regulators dreams, and in reality
Figure 5.1:    BNP Paribas geographic and business profile
Figure 5.2:    JPMorgan 2010 net income against performance targets
Figure 5.3:    Breakdown of Santander profits by geographic market
Figure 5.4:    Standard Chartered’s earnings growth, 2001–10
Figure 5.5:    SHB’s annual growth in equity and dividends
Figure 5.6:    TD Bank’s superior return on risk-weighted assets
Figure 5.7:    Wells Fargo Tier 1 common equity ratio
Figure 8.1:    Projected ROEs in European banking

Research participants


Autonomous Research
Arrow Financial Corporation
Barclays Bank Espana
Barclays Capital
Graham Bishop
BlackRock Investment Management
BMCE Bank
BNY Mellon
Boston Consulting Group
Collins Stewart
Credit Suisse
DnB NOR
European Banking Authority
Financial Services Authority
Fitch Ratings
Freeman & Co.
KBC Bank
Keefe, Bruyette and Woods
Lloyds TSB
Loughborough University (Professor David Llewellyn)
Herschel Post
Promontory Financial Group
Risk and Regulation Consulting Ltd
State Street Bank
Stern School
UniCredit
University of North Wales (Professor Philip Molyneux)

Reviews



“Much has been written about the causes of the financial and banking crises.  In his new book ‘The Future of Banking’ Steve Davis analyses some of the less frequently cited causes such as:deficient bank governance, regulatory shortcomings and the drive for unrealistic profitability. He uses these same factors to offer a view – as only he can and not always very comforting! – about the future and how bank managements, regulators and investors will need to respond”. Sir Win Bischoff, Chairman, Lloyds Banking Group


"An excellent, comprehensive, and highly readable work.  Steven Davis is an accomplished and internationally renowned analyst of bank trends bringing to the task a wealth of experience both as a banker and banking consultant. Davis considers the key dimensions of bank strategy, corporate governance, the evolving regulatory and supervisory regime, and risk management strategies, and offers a wealth of valuable insights.  The analysis is powerfully informed by a series of powerful case studies of banks which have been successful in risk management and strategy rather than, as with most previous studies, on what went wrong. This timely book gives an in-depth analysis of banks that have achieved success in their models over an extended period. In the process, the author considers the key issue of how to reconcile loss mitigating strategies whilst at the same time achieving satisfactory investor returns.  The penetrating discussion is also greatly informed by a series of structured interviews with bankers, analysts and supervisors.

This report is a tour de force and the analysis that Davis presents will be of real value to bankers, supervisors, bank analysts and academic scholars. It is a must-read."  Professor David T Llewellyn,oughborough University, and Vienna University of Economics and Business

.“Drawing on insight from senior industry managers, this work offers a compelling and comprehensive view of the post-crisis retail environment”  Roberto Nicastro, global retail head, UniCredit

"A fascinating analysis  - offers valuable insights and a thorough overview of current issues."
Yves Robert-Charrue, Member of the Executive Board, Head Investment Solutions Group, Bank Julius Baer & Co Ltd.

Author


Steven I Davis has spent his career in the banking and financial services sector as a senior executive, strategy consultant, author, analyst and teacher.  He is a graduate (magna cum laude) of Amherst College and of the Harvard Business School.

His 20-year career in international banking commenced at JPMorgan, where he managed a Paris-based research and M & A unit.  For Bankers Trust Company, he ran a venture capital subsidiary in New York and later the bank’s European businesses from a London headquarters.  Subsequently he set up and managed for six years the London-based merchant banking subsidiary of First International Bancshares of Dallas, Texas.

Since establishing Davis International Banking Consultants (DIBC) in 1980, he has managed several hundred strategy assignments for commercial and investment banks, global fund managers, insurers and other financial institutions.  In 1993, he headed a DIBC team which advised the Norwegian Ministry of Finance on the restructuring of the country’s banking sector during the Nordic banking crisis.  In addition, he and his colleagues have prepared over 60 research reports on the financial sector for publication by investment banks and other clients.

Mr. Davis is also the author of 14 books and reports published on best practice in the financial services sector.

A new and essential course that explains the EU regulatory revolution for finance professionals at all levels


Why you need this course

The EU has been pushed into a journey to a new world of financial regulation and it is clear that EU finance professionals will be working within an overarching regulatory framework that is run at EU level.  A large part of the EU shares a single currency which is forcing its users into an ever-closer union. But there is a second driving force towards regulatory change: the global financial crash and the corresponding global response co-ordinated at G20 level. Accordingly, users of the euro will see a much closer degree of financial regulatory integration to be a natural part and parcel of that political closeness.

 

A massive review of almost every aspect of regulation is underway – with more to come in the retail area and a second wave in the field of capital markets. As the full consequences of the crisis are considered, professionals in many fields (banking, securities, law, accountancy, asset management, insurance, etc.) may need targeted help to keep up with the pace and breadth of these changes.

 

Senior managers need to understand the political linkages that are driving fundamental reform horizontally across many different business sectors as failure to recognise then early may put their firms at a competitive disadvantage. As an example, the Commission’s retail agenda has not yet reached the popular press but the combination of SEPA with PRIPS, IMDII and MiFIDII is designed to give a level playing field across retail savings products from firms in securities, asset management and insurance. Moreover, that playing field is intended to be cross-border.

 

A newcomer to the industry will need an understanding of the origins of the pressures that have driven the current legislative patchwork into existence. Once the shape of the tree is understood, then the intricacies of the design of a particular branch will become relevant and comprehensible.

 

Course overview

Developed by economist and leading EU regulation expert Graham Bishop, The Creation of an EU Financial Regulatory Framework forms a Foundation Course for anyone who needs to understand the EU's journey into the new world of financial regulation. It consists of four online lectures, and accompanying course material, that may be undertaken as individual modules or as a complete course. Each lecture is split into three or four subsections so that each can be viewed independently and a professional can supplement their knowledge in any specific area they need. The complete course is designed to help all students of financial regulation in the European Union, whether embarking on a career, or part-way through. But it will enable a newcomer to the financial services industry to be well versed in the background to the EU's Single Currency, Single Market and Financial Regulation.

 

If required, there is a five question, multiple-choice exam at the end of each complete lecture, on successful completion, a pass certificate can be printed out for CPD purposes. An increasing number of professional bodies accept our course and webinars for Continuing Professional Development (CPD) purposes.

 

Lecture 1: Milestones in European Monetary Integration: 1945 – 2011 (includes a copy of the book 'The EU Fiscal Crisis: Forcing Eurozone Political Union in 2011) - more information on this book here
Lecture 2: The Politics of EU Financial Services Regulatory Architecture
Lecture 3: The Global Financial Crisis of 2007 and Onwards: The Global and EU Responses (includes a copy of the book 'EU Financal Regulation: Key Events 2010/2011) - more on this book here
Lecture 4: The 2010 regulatory reform package – implications

 

Download the full course synopsis here

 

Each Lecture is priced at €150+ VAT/£124+ VAT/$190, or €550+ VAT/£454 + VAT/$699 for the complete course. On payment you will be sent full instructions on how to access the material.

Lecture 1: Milestones in European Monetary Integration: 1945 – 2011

EU FR Framework Lecture 1 £148.80 Add to Cart
 

Lecture 2: The Politics of EU Financial Services Regulatory Architecture

EU FR Framework Lecture 2 £148.80 Add to Cart

Lecture 3: The Global Financial Crisis of 2007 and Onwards: The Global and EU Responses

EU FR Framework Lecture 3 £148.80 Add to Cart

Lecture 4: The 2010 regulatory reform package – implications

EU FR Framework Lecture 4 £148.80 Add to Cart

Complete course: Save €50/£40/$60

EU FR Framework complete course £544.80 Add to Cart

Sterling and Euro prices include VAT which is chargeable in the UK and the EU. If VAT is not applicable, the amount will be deducted at checkout.Euro and dollar prices are illustrative and will be calculated using current exchange rates at checkout.

 

Contents


Lecture 1: Milestones in European Monetary Integration: 1945 – 2011

Part 1: Origins and objectives of the EU
1945 End of World War II
1946 Churchill In Zurich
1950 Schuman Declaration
1955 Messina Declaration
1957 Treaty of Rome
1986 Single European Act

Part 2: Creation of the single currency
1970 Werner Plan
Problems of the ERM
1989 The Delors Report
1991 Treaty of Maastricht
1999/02 Introduction of single currency

Part 3: Achievements relevant to financial services
1992 The single market - the "1992" programme
1999 FSAP - 1999 update of the single market

Part 4: Economic Governance
1979/2011 Development of the European Parliament
The Community method versus inter-governmentalism
2007 Treaty of Lisbon: Council and Parliament as co-legislators
2010 May: Effective decision for "political union"
2011 December: the International Agreement

 

Lecture 2: The Politics of EU Financial Services Regulatory Architecture    
Part 1: SEM and Financial Services
The single market : '1992' programme
FSAP - 1998 update of the Single Market

Part 2: Driving the FSAP reforms forward
Commissioner Monti 1995-1999
Commissioner Bolkestein 1999-2004
Commissioner McCreevy 2004-2010
Commissioner Barnier 2010-2014

Part 3: Lamfalussy Process: financial integration = political integration
The Wise Men's mandate
The "four level" process
CESR, CEBS, CEIOPS
Parliament and Council co-decision
Lisbon Treaty

Part 4: Current financial regulation architecture - the 2010 package
De Larosière Group report
Key regulatory powers to European level
ESMA, EBA, EIOPA

 

Lecture 3: The Global Financial Crisis of 2007 and Onwards: The Global and EU Responses

Part 1: The Rise of the G20
Washington -2008
London - 2009
Pittsburgh - 2009
Toronto - 2010
Seoul - 2010
Cannes - 2011

Part 2: Globalisation of Financial Regulation
BIS
BCBS
IOSCO
IASB
IAIS
CPSS
FSB

Part 3: EU Responses (as at Autumn 2011)
Commission response to G20
Key Events - 2010/11
AIFMD
CRA
CRD III
EMIR

 

Lecture 4: The 2010 regulatory reform package – implications

Part 1: Powers
Council and Parliament
Commission
The Meroni Judgement and Comitology
Authorities

Part 2: Regulations and Directives
What is a Directive?
What is a Regulation?
The original request to Lamfalussy
Transposition problems of Directives
Solution: more Regulations

Part 3: Current financial regulation architecture - the 2010 package
De Larosière Group report
Key regulatory powers to European level
ESMA, EBA, EIOPA

Part 4: Impact on national regulations e.g. UK
Primacy of EU-level legislation
National regulators freedom to act
Role of FSA


About Graham Bishop


GrahamBishop.com was founded in July 2000 to bring our clients the direct insights that flow from Graham’s position as a leading technical analyst of economic and structural developments in the financial markets of Europe.


GrahamBishop.com is engaged with the key participants in this rapidly changing environment: Investors, issuers (government and private), politicians, officials, central bankers, providers of the market infrastructure, academics, the media and other interested parties. Our contacts span the EU: at the European level, they include the Parliament, Commission and Central Bank as well as representative bodies and think tanks. In many Member States, contacts cover the same breadth of participants. Our aim is to bring our members into contact with others in these groups and, especially, the opinions that flow from participants with such different perspectives.

 

The proximity to the policy formation process stems from Graham’s standing with the European Commission, the European Central Bank and European Parliament. This enables us to interpret economic and political developments with authority and insight. Moreover, we have close links with many think tanks in London and Brussels and the Brussels for Breakfast meetings in many EU financial centres give a particular insight into the interaction of market participants and regulators around the EU.

 

Published in Current Titles

by Graham Bishop

Understand the development of European financial markets

EU_Reg_tmbEurope’s financial system is part way through responding to a series of huge shocks. These were triggered by the US sub-prime mortgage crisis, but it soon became apparent that there were many problems that had been obscured by a long period of economic growth. These have now been forced to the surface and include the interlocking solvency of EU Member States and their banking systems. But they also include the dissatisfaction of electors and tax-payers with a financial system that has turned out to be far more risky than anyone realised, and dissatisfaction with the knowledge and ethics of some market participants.

All market participants – accountants, bankers, insurers, investors, lawyers, regulators – are likely to face demands to have a much greater understanding of their subject. This book is designed to help all students of financial regulation in the European Union, whether embarking on a career, or part-way through.

The foundation of such training is likely to include an understanding of how regulations are created and the political forces that propelled them into existence, as well as the technical compromises that had to be struck along the way. GrahamBishop.com is delighted to be able to put much of our research into the development of European financial markets into formats that can be used explicitly to provide the foundation of this knowledge base. This book provides an overview of the key developments in each sector – split by months so that it is a simple read-through of progress. We record the facts of proposals and decisions, as well as the arguments that went into the final compromise. (For those who wish to continue their professional development, we offer a range of possibilities – contact This e-mail address is being protected from spambots. You need JavaScript enabled to view it .)

But all this must be set in the framework of the economic crisis that may yet derail the single market and destroy the idea of a single European economic space. So we include a chapter on the key developments in that field, as well as Graham Bishop's own writings that attempt to offer helpful analyses and suggestions to promote a greater degree of unity in Europe.

 

 Click here for Contents

 Click here for FREE Introduction

 Click here for sample pages


Published January 2012
ISBN 978-1-907720-35-2
206 pages, PDF format only

€25.00 + VAT/£20.65 + VAT/$32.00

EU Financial Services Regulation: Key Events 2010/2011 - PDF £24.78 Add to Cart

Sterling and Euro prices include VAT which is chargeable in the UK and the EU. If VAT is not applicable, the amount will be deducted at checkout. Euro and dollar prices are illustrative and will be calculated using current exchange rates at checkout.

 

About Graham Bishop

GrahamBishop.com was founded in July 2000 to bring our clients the direct insights that flow from Graham’s position as a leading technical analyst of economic and structural developments in the financial markets of Europe.


GrahamBishop.com is engaged with the key participants in this rapidly changing environment: Investors, issuers (government and private), politicians, officials, central bankers, providers of the market infrastructure, academics, the media and other interested parties. Our contacts span the EU: at the European level, they include the Parliament, Commission and Central Bank as well as representative bodies and think tanks. In many Member States, contacts cover the same breadth of participants. Our aim is to bring our members into contact with others in these groups and, especially, the opinions that flow from participants with such different perspectives.

 


The proximity to the policy formation process stems from Graham’s standing with the European Commission, the European Central Bank and European Parliament. This enables us to interpret economic and political developments with authority and insight. Moreover, we have close links with many think tanks in London and Brussels and the Brussels for Breakfast meetings in many EU financial centres give a particular insight into the interaction of market participants and regulators around the EU.

 

Published in Current Titles
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