I WAS CHATTING to a veteran debt originator the other day. He commented that the past few years have been and probably continue to be the most fascinating ever for investment banking commentators like myself. He then sighed and gave me one of those wistful looks that gave me the distinct feeling that he didn’t necessarily think the same about the post-crisis period for investment banks.
He’s probably right on both counts. For we media types, there’s an almost endless supply of source material: from banks, policymakers, regulators, central banks, politicians, trade bodies, lobby groups, think tanks, NGOs and community groups. The art, if you like, resides in taking what you perceive to be relevant, forming a balanced view or adopting a stance based on real conversations.
I’m fortunate in that I get to speak to a hell of a lot of people in my travels and wending my way through the full spectrum of investment banks’ activities and market segments. I was in New York a couple of weeks back, where the day after the October FOMC meeting I’d moderated a couple of panels on the outlook for US rates and credit and had some great chats about the ifs, whys, whats, whens and hows of monetary action and the Fed’s dance with data.
This past week, I fronted a session in London on the outlook for DCM. This coming week, November 10, I’m hosting IFR’s European ECM conference followed by IFR’s 16th annual Bank Capital conference on November 19 – in the wake of the FSB’s submission of the final TLAC blueprint to the G20 in Antalya. I end the month in India hosting two events on equity financing and credit and then back to London to tackle Green bonds and where we are on sustainable capital markets – just ahead of COP-21 in Paris.
I don’t mean to bore you with this insight into my diary. It’s a busy schedule but one that allows me to put a lot of market intelligence into the tank. As a sentiment checker and a filter of the themes driving global sentiment, it’s a fine way of gauging what’s going on.
Strategy has to be cyclical, ideally moving in synch with underlying economic and business conditions
WHAT SET ME reflecting this past week were the most recent updates from Credit Suisse, Deutsche Bank and Standard Chartered – Barclays up next as Jes Staley gets his feet under the table in early December. What struck me was that no matter how much progress is made, the banking world is and will always be far from any sort of strategic end-game because the policy and business worlds are forever moving in tandem.
The most recent tactical iterations coming out of banks in transformation mode take us through to the end of 2018. But it won’t end there. Strategy has to be cyclical, ideally moving in synch with underlying economic and business conditions. But capturing that synchronicity involves a degree of structured pre-emption based on future expectations, guesswork and assumptions around not just the economy but also how your clients deal with it and how you position yourself to best assist them.
Or alternatively – as per DB – you ditch clients because you can’t monetise them and you move on. In a world of moving targets and in an ultra-competitive world that forces you forever to peek over the fence to see what everyone else is doing, any strategic call is tough to make. And I imagine rather unsettling because you can never be sure you’ve done the right thing.
IF STRATEGY-SETTING IS a perpetual motion machine, so is the policy world that sets the framework around it. The latter continues unremittingly and resolutely along its path to nirvana. The European Banking Authority published for discussion on November 5 its 2016 EU-wide stress test draft methodology for the 53 participating banks (39 falling under the SSM) covering more than 70% of the EU banking sector. The results will be published in Q3 2016. There’s no single capital threshold embedded in the tests but the results, the EBA notes, will inform the 2016 Supervisory Review and Evaluation Process, “acting as a challenge to banks’ forward looking capital plans”.
A couple of days earlier, the Financial Stability Board had updated its G-SIB/G-SII lists (RBS down a notch; BBVA and Generali out; China Construction Bank and Aegon in). The FSB also released two finalised guidance papers and three consultative documents in its eternal quest to consign “too-big-to-fail” to history. It also pushed out a couple of reports on the implementation of G20-directed OTC derivatives reforms.
On TBTF, I was slightly bemused to see comments by Elke Koenig, chair of the EU’s Single Resolution Board and of the FSB’s Resolution Steering Group. “Cross-border resolution planning has come far from the state that existed in the wake of the global financial crisis. The results from the first round of the Resolvability Assessment Process that home and host authorities of globally systemic banks have completed this year have shown that we have more work to do before we can claim that such firms are truly resolvable”.
I say bemused … after so much effort and diligence, so much time; the introduction of the bail-in agenda, the capital, liquidity and leverage planning and execution, we’re told cross-border resolution is still beyond our grasp. I wonder if I should be alarmed or depressed.
