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from Breakingviews:

Blackstone finds way to outsource skin in the game

By Neil Unmack

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

Blackstone has devised a novel definition of ”skin in the game”: other people’s money. The buyout and debt management firm is taking advantage of newly relaxed rules on how much risk needs to be retained in securitisations, to improve its returns. Its structure looks acceptable – but regulators and investors should still watch for sharp practice from future copycats.

European skin-in-the-game rules were introduced to prevent a repetition of the 2008 mortgage crisis, which saw lenders make dud loans and flip them to bond markets. Creators of assets that are securitised now have to keep 5 percent of the risk. That hampered the issuance in Europe of collateralised loan obligations, a kind of investment vehicle funded through securitised debt. Few of the asset managers who oversee the vehicles can finance one euro for every 20 they manage.

The European Banking Authority last December tweaked the rules so that asset managers can avoid retaining the risk in the CLO – so long as another entity does, and that entity originates half the CLO’s loans. Blackstone is among the first to notice. It has set up an originator to make loans and repackage them as CLOs – managed by Blackstone, naturally. The twist is that the skin in the game will mostly come from public equity markets.

from Breakingviews:

Latest blunder hits StanChart where it most hurts

By George Hay

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

Standard Chartered’s latest blunder hits the UK bank where it hurts most. New York State’s Department of Financial Services has slapped a $300 million fine on the emerging markets-focused lender for compliance lapses. It reinforces the disturbing impression that StanChart’s top brass aren’t on top of things.

from Breakingviews:

Ushering Eric Cantor to revolving door

By Rob Cox

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

The following is a fictional letter that could be circulated in the corridors of K Street, the canyons of Wall Street and the hedgerows of the Hamptons this summer:

from Breakingviews:

“New Deutsche” just got pushed back again

By Dominic Elliott

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

Raising $12 billion last month now looks like the easy part of Deutsche Bank’s renewal. The German lender is, it emerges, under fire from United States regulators for a raft of procedural failings. Deutsche may have repaired its capital position and revamped its strategy this year. But persuading investors the bank holds itself to higher standards than before the crisis is starting to look like a generation’s work.

from Breakingviews:

UK banks have much to fear from latest probe

By Chris Hughes

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

The latest competition review of UK banking should aim to be the last. An antitrust probe in 2000 led to limited price controls after concluding that British lenders made excess profit. There were two more big investigations after the financial crisis. Yet concerns about market inefficiencies persist. That suggests the Competition and Markets Authority should do something radical this time.

from Breakingviews:

Why investors were taken in by Gowex

By Fiona Maharg-Bravo

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

It’s easy to be wise with hindsight. Take the collapsed Spanish free wifi provider Gowex. The company raised several large red flags that domestic regulators and investors should have noticed. It took a foreign investor, specialist short-seller Gotham City Research, to uncover Gowex chief executive’s fraud.

from Breakingviews:

Portugal in race against time to sort out BES

By George Hay and Neil Unmack

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

Lisbon needs to sort out Banco Espirito Santo – fast. Despite a recent successful rights issue, Portugal’s second-largest bank by value has a troubled major shareholder and a large exposure to shaky Angolan loans. With Portuguese bond yields up 40 basis points since July 7 and domestic bank shares tanking, a speedy restructuring is needed.

from Breakingviews:

Capital flight crackdown would hurt outside China

By Peter Thal Larsen

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

A Chinese crackdown on capital flight would be felt around the world. The government has long tolerated some cash finding its way around the country’s financial border controls. If Beijing decides to plug the leaks then banks, casinos and overseas property markets would suffer.

from Breakingviews:

U.S. cooks up penalties with anti-foreign flavor

By Reynolds Holding

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

Uncle Sam is cooking up penalties with an anti-foreign flavor. New research suggests that overseas firms like BNP Paribas do in fact pay bigger fines and plead guilty more often than U.S. companies. One reason may be that prosecutors target only the most serious cases abroad. But the differences feed suspicions that America is playing favorites.

from Breakingviews:

Barclays’ hit reflects investment bank fears

By Dominic Elliott

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

The market’s reaction to accusations that Barclays duped clients in its dark pool reflects more general fears of investment banking. Shares in the UK bank tanked as much as 9 percent on June 26 after New York Attorney General Eric Schneiderman alleged Barclays misled investors by playing down the number of “predatory” high-frequency traders on its private trading platform for equities. Barclays says it takes the allegations “very seriously.”

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