Reuters blog archive

from Hugo Dixon:

Capital markets union needs deregulation

By Hugo Dixon

Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own.

One of the biggest projects for the next European Commission, which takes office in November, will be to create a “capital markets union.” President-elect Jean-Claude Juncker last week gave Britain’s Jonathan Hill the task of creating such a union “with a view to maximising the benefits of capital markets and non-bank financial institutions for the real economy.”

The prime goal of capital markets union should be to develop healthy sources of non-bank finance that can fund jobs and growth. The European Union suffers from clogged up and fragmented capital markets, which are a fraction of the size of their U.S. equivalents. Changing this is vital because banks, especially in the euro zone periphery, are on the back foot and not able to finance a recovery on their own.

How exactly should this capital union be created? In some cases, no doubt, there will have to be new regulations. One of the ironies of creating any single market – and the capital markets union project can also be viewed as completing Europe’s single market in capital – is that rules have to be passed to break down barriers that balkanise the market.

from Breakingviews:

RBS/Lloyds moving plans leave key questions opaque

By George Hay

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

Scotland’s largest banks have moved to head off a crisis. Royal Bank of Scotland and Lloyds Banking Group say they will shift their Edinburgh-domiciled operations to London, should Scots vote for independence on Sept. 18. That’s a step towards financial stability – but not if you’re a Scottish consumer.

from Breakingviews:

Botin’s swashbuckling hid a conservative streak

By Peter Thal Larsen

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

Emilio Botin transformed Santander from regional Spanish lender into global giant. He was a merger mastermind who usually got the upper hand. With slicked-back hair and red tie, he flew in a private jet, conferring with presidents and prime ministers as easily as bankers and chief executives. Yet unlike many of his peers during European banking’s boom years, Botin also had a cautious streak. It is that, rather than his swashbuckling style, which allowed him to keep his grip on Santander until his death at the age of 79.

from Breakingviews:

Santander loses a leader and gains an opportunity

By George Hay and Fiona Maharg-Bravo

The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

Santander has lost its figurehead, but gained an opportunity. The death of Emilio Botin at the age of 79 means the euro zone’s biggest bank is no longer run by the euro zone’s most lauded banker. The share price fell 1.4 percent in response. But Santander now has a chance to take its corporate governance into the 21st century.

from Hugo Dixon:

Gas and bank security have similarities

Europe is currently conducting two stress tests. One is on its energy suppliers, to see how badly they would fare if Russian gas was disrupted. The other is on euro zone banks, to ensure they are strong enough to finance economic recovery.

It is hard to know which of the two is the more important. But it is clear that an effective regime for energy security requires many of the same elements as financial stability.

from Breakingviews:

LendingClub IPO mixes disruption with confusion

By Kevin Allison and Daniel Indiviglio

The authors are Breakingviews columnists. The views they express are their own. 

LendingClub is positioning itself as one of the biggest challengers to American banks. The company is growing quickly, has backing from the likes of Google and lists former Morgan Stanley boss John Mack and ex-Treasury Secretary Larry Summers among its directors. It’s also planning an initial public offering. But there are reasons to be cautious.

from Breakingviews:

Why Citigroup would be better in bits

By Rob Cox

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

Nine years ago, Breakingviews proposed an “extreme idea” to Citigroup’s then-leader Charles Prince. The $240 billion New York bank’s market capitalization was lower than the worth of its parts valued separately. By splitting into three separate units, the idea was, Prince could hand shareholders an extra $50 billion or so, the equivalent of one entire U.S. Bancorp at the time.

As it turned out, Citi had bigger concerns ahead. The housing crash exposed spectacular losses, wiping out capital and necessitating a government bailout. Prince was sent dancing onto the golf course. With the crisis now fairly distant in the rear-view mirror, however, it’s time for current Chief Executive Michael Corbat to revisit the case for a breakup.

from Breakingviews:

Banks risk provoking EU with bonus get-arounds

By Dominic Elliott

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

Investment banks that are too successful in mitigating the impact of Europe’s new bonus curbs could be setting up another fight over pay. Most big banks are now paying so-called allowances to circumvent European Union rules, which bar firms from paying bonuses worth more than double base salary. If policymakers conclude that bankers are still wrongly paid, they could do something about it.

from Breakingviews:

ECB deserves to lose market’s inflation confidence

By Swaha Pattanaik

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

The case of the euro zone’s vanishing inflation rate has so far stumped European Central Bank President Mario Draghi. Quite rightly, investors’ faith in his ability to do anything about the problem is also evaporating.

from Breakingviews:

BES bail-in leaves CDS traders struck out

By Neil Unmack

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

Banco Espirito Santo’s bail-in has been a nice earner for some bond traders. Anyone who bet that Portuguese authorities would save senior creditors but burn bonds lower down has made a killing. But anyone who tried to follow suit with BES credit default swaps will be feeling much less cheery.