Intesa Sanpaolo chief executive Carlos Messina has a lot to say to the Financial Times in a fascinating interview. Italy is sometimes characterised as publicly poor but privately rich, as Italians learned how to survive a perennially tumultuous political system. Italian banks have traditionally tapped retail investors, who invest in bank securities along with keeping their savings there, and the Italian government has angered the ECB with its efforts to staunch losses among pensioners and other retail investors. But losses caused by a Brussels antitrust ruling in 2014, which ruled that bank rescues constituted state aid, fanned populist anger in Italy and re-drew the allegiances of many Italians. "That forced Italy's government and bank bosses to scramble for other solutions to solve crises at a further 10 banks," notes the FT. "These involved losses for retail investors at Monte dei Paschi di Siena and two large banks in the Veneto region, which have fanned anti-banker rage. 'That was the starting point of a nightmare in terms of a managing a crisis situation,' Mr Messina said." Read the full story here at the FT [paywall].
The search for yield in negative interest rate environments in Europe and Japan has banks looking abroad. Japanese banks are piling into US securities, doubling their investment in collateralised loan obligations. Say what? That sounds familiar. "While the increased exposure brings back memories of similar, complex products made up of subprime mortgages that triggered a global financial crisis a decade ago, banks say they are managing risks carefully," says Reuters. Whew. Santander is also planning to ramp up emerging markets investments, and is making an offer to take full control of its operations in Mexico, in a $2.24 billion deal. "The proposed deal, which will unwind Santander's listing of 25 percent of the bank on the Mexican stock exchange in 2012, shows how the Spanish bank aims to focus more on emerging economies while cutting costs in mature markets in Europe," says Reuters. "Banks in Europe are cutting back to offset a squeeze on margins from record-low interest rates in the euro zone. In Mexico, benchmark interest rates are currently at 8.25 percent, the highest since the financial crisis."
How the mighty have fallen, in a week of good news and bad news for Dubai. The city state made a pitch this week at LendItUSA as the fintech centre in the Middle East, and the news coinciding with a successful IPO and an announcement on the US East Coast indicting former Abraaj executives for alleged fraud. "Two former executives of The Abraaj Group, which collapsed last year in the world's biggest private-equity insolvency, were arrested on U.S. charges of defrauding investors, with one defendant nabbed after arriving in New York with his wife and son to look at colleges," reports BNN Bloomberg. "Arif Naqvi, the founder and ex-chief executive officer, was arrested Wednesday in the U.K. and is awaiting possible extradition to the U.S. Mustafa Abdel-Wadood, a former managing partner, was apprehended Thursday in New York and remains in a federal lockup." US prosecutors said they had successfully placed a geo-location tracker on Abdel-Wadood's phone, which is another way of saying that anyone with a phone can be put under surveillance at the tap of a button. The timing may be coincidental but it comes a day after Dubai's Network International managed a successful IPO in London. Abraaj, former owner of half of the business, was bought out by Warburg Pincus and General Atlantic.
It's really hard to beat banks when it comes to financial crime, and former banker Frances Coppola this week looks back over the less than salubrious history of recidivist Standard Chartered, which this week was fined more than one billion dollars by UK and US regulators for its sanctions breaking and money laundering. "For Standard Chartered Bank (SCB), an emerging-markets specialist lender with no retail presence in the U.K. or U.S., this is a substantial penalty. But will it be enough to make it change its ways?" The answer is no, despite the cost of lawbreaking. "But for a bank, regulatory fines are simply a cost of doing business. If the anticipated profits exceed the likely costs, the bank will continue to break the rules. And this is exactly what SCB has done." If a former banker can figure this out, what are the regulators up to?
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