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from Breakingviews:

Blackstone leaves a trail of money to follow

By Jeffrey Goldfarb

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Blackstone is leaving quite the trail of money to follow. The buyout firm led by Steve Schwarzman generated record earnings in the first quarter, in stark contrast to the slog happening on Wall Street. It’s the latest sign of a power shift from banks to shadow banks, broadly defined. Having confined big lenders, watchdogs could pick up the scent on Blackstone and its ilk.

By publishing its results on the same day as Goldman Sachs and Morgan Stanley, the divergence in fortunes was hard to miss. Blackstone’s economic net income increased by 30 percent and the amount of cash available to pay out to shareholders surged by 24 percent. Assets under management also climbed by 25 percent to $272 billion. While the two big investment banks exceeded the expectations of analysts, neither hit new highs the way Blackstone did.

The constraints on big financial institutions keep taking their toll. Even JPMorgan boss Jamie Dimon, after years of putting up a fight against increased scrutiny, seemed resigned to the stricter new regime in his letter to shareholders this month. Losing a protégé and one of his top lieutenants, Mike Cavanagh, to Carlyle Group in March was another indication of how the less regulated world of private equity is stealing a march on its too-big-to-fail counterparts.

from Breakingviews:

Morgan Stanley gets most relief from first quarter

By Antony Currie

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Few banks have reported much to crow about in their first-quarter earnings. But Morgan Stanley can claim relief, at least, from the $1.45 billion in net income it unveiled on Thursday. Chief Executive James Gorman presided over a far better start to the year than in 2013, including bucking the Wall Street trend in fixed-income trading. More importantly, Gorman looks closer to hitting targets than rivals like Bank of America and Citigroup.

from India Insight:

Bandhan eyes India’s banking league with RBI licence

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Kolkata-based Bandhan Financial was little known in India’s corporate arena. But a new banking licence from the Reserve Bank has given Managing Director Chandra Shekhar Ghosh and his 13,000 employees a reason to cheer.

“This is a different type of win. In the last 13 years they (employees) have been working hard and now they have got the recognition,” said Ghosh. “I hope that this is not a big challenge, the challenge is to develop the skills of the staff, it will take some time.”

from Alison Frankel:

Can banks force clients to litigate, not arbitrate?

If you are a customer of a big bank -- let's say a merchant unhappy about the fees you're being charged to process credit card transactions -- good luck trying to bring claims in federal court when you're subject to an arbitration provision. As you probably recall, in last term's opinion in American Express v. Italian Colors, the U.S. Supreme Court continued its genuflection at the altar of the Federal Arbitration Act, holding definitively that if you've signed an agreement requiring you to arbitrate your claims, you're stuck with it even if you can't afford to vindicate your statutory rights via individual arbitration.

But what if you're a bank customer who wants to go to arbitration -- and, in a weird role-reversal, the bank is insisting that you must instead bring a federal district court suit? Will courts show the same deference to arbitration when a plaintiff, rather than a defendant, is invoking the right to arbitrate and not litigate?

from The Human Impact:

Did you know that supporting gay rights is good for business?

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People often approach the issue of gay rights (if one can even call it an issue) from the “doing the right thing” perspective, meaning that supporting the rights of homosexuals, bisexuals and transgender people is the right thing to do because everyone should be free to be who they are without facing discrimination of any kind.

This argument is, of course, extremely valid, but perhaps not the most effective when seeking the support of big businesses and financial institutions.

from Financial Regulatory Forum:

Insight: U.S. OCC’s “heightened expectations” standards for bank governance, and how to meet them

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By Abel Picardi, Compliance Complete

NEW YORK, Mar. 21 (Thomson Reuters Accelus) - Proposed risk standards for banks regulated by the Office of the Comptroller of the Currency (OCC) will expose top executives and directors of federally chartered insured institutions to greater accountability for any legal, risk or compliance shortcomings.
The OCC proposed the standards in January as way to broaden and enforce the application of its “heightened expectations” for bank stability. The expectations were issued in 2010, in response to the financial crisis. The proposed guidelines’ focus on top bank governance directly aims to limit ”accountability risk,” or the risk that a leadership not held to the consequences of its decisions can endanger an institution.

Under the proposed guidelines, the bank’s board of directors and the executive management team will be accountable for raising the standards for the organization’s risk-management practices. The board and CEO must ensure that the organization has in place a suitable governance risk framework and a business culture that adequately addresses conduct risk.

from Breakingviews:

Ken Moelis engineers the deal of his lifetime

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By Antony Currie
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Ken Moelis has engineered the transaction of his lifetime. The veteran investment banker is taking his eponymous seven-year-old advisory firm public. Revenue and net income have grown at a fast enough clip to potentially justify a valuation of $2 billion or more. But investors will be granting the founder an exceptional degree of control for the opportunity to ride his coattails.

from Felix Salmon:

The unintended consequences of cheaper remittances

Once upon a time, remittances, especially to Mexico, were the next big thing. In 2002, for instance, Bank of America bought 24.9% of one of Mexico’s big three banks, Serfín, mainly for the remittance business:

Bank of America says it will compete with Citigroup for Mexican and Mexican-American customers in the United States. It particularly hopes to win a larger share of fees from the $10 billion in remittances they send to Mexico each year…

from Felix Salmon:

Incompetent Banamex

A couple of weeks ago, I was at a lunch discussion of immigration policy, of all things, in which I defended Citigroup’s decision to move various risk-management operations from New York to Mexico. I was talking to a woman who was complaining about the move and about the amount of time that the Mexico office would sometimes take before arriving at a decision. But my view was that moving such operations to Mexico was probably a good thing, on net. After all, Citi’s Mexican bank — Banamex — is one of the most efficient banks in the Americas, and makes a lot of money while taking very little in the way of risk. And on the other side of the trade, the New York office was precisely the place where Citi’s risk management was worst. After all, it was New York which missed the entire subprime problem, along with many other incidents in which Citi managed to blow itself up.

Now, however, it seems that Banamex has a level of risk management which is bad even by Citi standards. Earlier this week a Reuters report showed how Banamex managed to lose some $85 million making bad loans to homebuilders, despite opposition from the head office:

from Breakingviews:

Rudloff’s retirement is bad timing for Barclays

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By Dominic Elliott
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Hans-Joerg Rudloff’s retirement at 73 comes at an unhelpful time for Barclays. The UK lender’s chairman of investment banking is stepping down after a distinguished career that spanned five decades – long enough for any banker. Rudloff’s achievements are myriad. A doyen of the eurobond market, which he helped create in the 1960s, 70s and 80s, Rudloff also saw the potential in Russia and central Europe in the 1990s, long before emerging markets became fashionable.

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