In favour of segregation

No, not other clearing post: this is about forms of transport. Consider the data to the right about the composition of traffic at a central London junction in peak hours from Cyclists in the City. This seems to be a reasonably even balance until you consider the space occupied by each form of traffic vs. […]

Healing circuits

I have endured a couple of talks recently on the use of network methods in financial stability analysis. While the general idea is interesting, the specific applications struck me as dubious in the extreme. So it was with some relief that I read something about robustness that was useful and impressive – albeit with no […]

Closing out Kweku

Reuters, in between telling a interesting story of the impact of Kweku Adoboli’s losses on UBS, gives us some insightful information on the close out of his position: The call that would eventually spell the end for [UBS boss Oswald] Gruebel came at 4 p.m. on Wednesday, September 14… [Gruebel] ordered a small taskforce — […]

The Lehman recovery advances…

…a little. From Reuters: Lehman Brothers Holdings Inc said on Wednesday it plans to distribute about $14.2 billion to creditors early next month… [this] will increase total distributions to about $47.2 billion, with two-thirds going to third parties. The company has said it hopes to distribute more than $65 billion, on average about 21 cents […]

Reacting to Cyprus

There has been a lot of negative comment about the Cyprus deal. That is understandable: you can reasonably argue that it will produce crippling austerity; that it is ridden with moral hazard; that it will create a bank run across most of Southern Europe. But what you can’t argue is that it was unexpected. After […]

High cost credit protection

From the new Basel consultative document BCBS 245: Credit protection costs will be considered material when the risk weight on the exposure in the absence of credit protection would otherwise be greater than 150% at the time the credit protection is bought… A bank must calculate the present value of material credit protection costs … […]

The camera as pencil

I pushed the scanner hard on this one; it worked out reasonably well though I think. The mist gives a nicely smudgy quality to it.

How big is OTC?

Jon, posting at the OTC space, does a nice job of setting out the size of various markets. In particular he uses gross market value rather than notional for OTCs, which is a (much) more useful measure. The results are interesting: Asset class Market Size ($T) Bonds 93 Loans 64 Equities 54 OTC Derivatives 27 […]

Credit index futures ahoy

Continuing the OTC derivatives futurisation trend, ICE announced this week that it will introduce credit index futures in May on the CDX IG, CDX HY, iTraxx main and iTraxx cross-over. Anyone care to take a bet on how much volume will be in futurised swaps vs. cleared OTCs this time next year?

Economic failures and political equilibria

An interesting idea, this, from Acemoglu and Robinson. They say Our basic argument is simple: the extant political equilibrium may not be independent of the market failure; indeed it may critically rest upon it. Faced with a trade union exercising monopoly power and raising the wages of its members, most economists would advocate removing or […]

Fattening up the tails

Many big banks have now had large operational risk-related events in the last few years, notably litigation related (think for instance of the PPI settlements in the UK or the mortgage ones in the US). What has that done to the banks’ operational risk capital models I wonder? You would have thought that having those […]

Bleak mid winter

This is definitely in Caspar David Friedrich territory. Update. Talking of being out in the cold, the Cyprus depositor bail in is generating a lot of comment this morning. The general view seems to be that haircutting uninsured deposits, while painful, would be reasonable; but the current proposal to also haircut insured deposits is a […]

JP with madeira and a tea cake*

It seems that JPMorgan’s travails have become a spectator sport, to be enjoyed with a snack of your choice. I am only half way through the senate report, let along the appendices, so I won’t add to the (already comprehensive) guides to the action‡. Instead I want to focus on four key issues which emerge […]

Doing the subsidy maths

There has been a blog-fight between Bloomberg, whose editorial suggested that large US banks enjoy an 80 bps funding subsidy from the tax payer, and Matt Levine, who came to, well, a lower number. Now, I don’t really have a dog in this fight, but I was amused to note that SIFMA, a trade association, […]

Meanwhile in another part of the forest

First, IntercontinentalExchange said it will launch credit-default swap futures in May. Second (and as an update from an earlier version of this post), Bloomberg threatened to sue the CFTC unless it halts regulations setting higher collateral standards for swaps than comparable futures: Bloomberg LP, the parent company of Bloomberg News, said the collateral rules are […]

And so it begins

The CFTC has announced that mandatory clearing begins today (well actually yesterday as I am out of town and got to this a day late). The requirement applies to new and notated swaps which fall within the CFTC’s clearing mandate.

Loan pass throughs

Mortgage backed securities began with pass throughs; these were simply bundles of mortgages in security form. The PT did what it said on the can, passing through payments on the underlying mortgages to the security owner, perhaps after a servicing fee has been taken. Only later did trenching come to the MBS market. Now, it […]

When will I see the sun again?

Splitting RBS

The RBS 2011 annual review lists (roughly*) eight business lines: UK Retail, comprising NatWest and RBS retail UK Corporate Wealth, which is mostly Coutts and offshore NatWest and RBS US Retail & Commercial including Citizens Bank and Charter One Ulster Bank RBS Insurance, including Direct Line Global Banking & Markets, the wholesale business Global Transaction […]

Quick links

I’m a little busy, so this will be short form: Jon Danielsson has a piece on VoxEU about the desirability of diversity in capital models. I don’t agree – I think we need fewer models used for capital purposes – but the argument is interesting. There’s a (sadly firewalled) opinion piece by De Larosière on […]