Receiving Wide Coverage ...
Yes, Virginia, There is a Volcker Rule: Columnists on both sides of the pond spent the weekend parsing the true meaning of the Volcker Rule, now that U.S. regulators have finalized it. Echoing a piece in American Banker last Tuesday, Gretchen Morgenson concludes in the New York Times that with so many aspects of the measure still open to interpretation like, um, is this activity an endeavor in approved market making or a thinly veiled attempt at proprietary trading the success or failure of Volcker "will depend upon the appetite of financial regulators to regulate." So how hungry are the regulators, exactly? That remains unclear. For now, Morgenson argues, Volcker's real gift is a "long overdue" discussion about regulatory accountability. Over in the FT, meanwhile, John Authers opines that having "more qualitative judgement by regulators should work far better" than the useless prescriptions of Basel II (see: 2008 global financial crisis). But that's if regulators can avoid being "outfoxed" by their more handsomely compensated counterparts in the banking sector, he notes.
Wall Street Journal
Tough choices at the Federal Reserve's policy meeting this week. The picture on unemployment and economic output seems to be improving somewhat, but inflation remains below the central bank's 2% target, reflecting weak consumption and wage growth. So, to taper or not to taper? "I think I would wait. But it's a very close call," the paper quotes former Fed Vice Chair Donald Kohn as saying.
Heard on the Street notes that it now costs $100,000 or less for a year of credit default swap coverage insuring against a default by any of the six largest U.S. banks. (During more panicked moments in recent years, it has cost as much as six times that amount.) Citing derivatives pricing from Markit, the paper notes that the cost of insurance against a failure by either Wells Fargo or JPMorgan Chase has been below the $100,000 mark for more than a year; pricing on contracts for Bank of America and Citigroup fell below that amount this year, and Morgan Stanley and Goldman Sachs dipped below that level in intraday trading just last week. The Most Improved Player award goes to Morgan Stanley. Insurance against a default by the firm would have cost you more than $200,000 in December 2012.
Admitting they have assets on the books that their U.S. customers neglected to declare, five state-backed Swiss banks have joined a Justice Department disclosure program for lenders that may have assisted in tax evasion by American clients. Banks from the cantons of Vaud, St Gallen, Graubunden, Lucerne and Zug joined seven other institutions that agreed last week to participate in the program, which will likely result in fines based on the amounts of the undeclared assets and the length of time that they were parked at the bank.
That ABN Amro poison pill sale of LaSalle Bank to Bank of America in 2007? It's still having repercussions, in some of the most unexpected places, for example, at the global trade finance business of Royal Bank of Scotland, which may be effectively frozen because of legal action over the bank's use of software supporting trade finance flows. The dispute with Complex Systems, which supplies the BankTrade software, dates back six years. It appears that RBS, which acquired the rest of ABN and its considerable trade finance business later in 2007, failed to have the license for the trade finance software properly transferred from LaSalle. In October, Complex Systems filed for an injunction that would force RBS to stop using the software. A ruling is expected to be handed down next month.
Also from the world of bank technology, the paper reports that Credit Suisse is launching an online marketplace for software developed by or for investment banking and hedge funds. Called Eco Financial Technology, the app store is seen as an effort to help "reduce the sector's rapidly spiralling technology costs." Anyway, as nifty as Credit Suisse's idea sounds, there are two big traditions in banking that are working against it: bespoke technology and ruthless competition.
New York Times
In case you missed it, the Sunday Review section had an engaging item reminding Bitcoin biddies that the whole concept behind Bitcoin has more to do with a crusade than an actual currency. Alan Feuer, a metro reporter at the paper, notes that the 500-word essay accompanying the disclosure of the code that launched Bitcoin in January 2009 was rooted in ideology that sparked a movement around unleashing repressed economies, waging war on the Federal Reserve and, ahem, taking down the global banking system. We're grateful for the reminder, as these ideas tend to get lost when you look at Bitcoin from the perspective of a Winklevoss twin.