Current section : The Big Stories


Small fish, big prize: The market makers out to eat the banks' lunch

Small fish, big prize: The market makers out to eat the banks' lunch

New specialist liquidity providers are nibbling away at the share of the big universal banks in more and more parts of the FICC markets. In swaps, government bonds, foreign exchange, credit, and in securities financing and repo, new entrants are on the march, stepping up to fill the gaps left by the retreating banks. Tech savvy, led by quants and data engineers rather than the expensive traders sitting on the scrap heap of most banks’ inferior tech, the new entrants now just need people with the skills to win over large numbers of customers.

Elvira Nabiullina, Euromoney’s central bank governor of the year, is staunchly sticking to her controversial crisis-fighting plan as Russia reels from its biggest financial crisis since 1998.

Bank ROE roller coaster: the point of no return

For several years, bank chief executives have harmed their credibility by promising medium-term earnings targets that they have never come close to hitting. Some have been ousted as a result. No more. In 2015 and beyond, 10% is the new 15% when it comes to projections of future returns on equity. Few are even hitting that lower target, which barely covers their cost of their equity. But there are signs that investors are starting to see the value in lower, less risky, more sustainable returns. And capital costs are falling. Could this be the end of the ROE roller coaster?

Barclays' identity crisis

One year on from its big restructuring announcement, Barclays is still struggling to convince that it has found the right model. Investment banking remains the sticking point. Senior executives in the division say they’ve pulled off a £100 billion restructuring and improved the client franchise. They want to invest for growth. But sceptics say that bull market conditions and accounting sleight of hand have flattered results and the investment bank needs to become even smaller and more focused. The instinct of chief executive Antony Jenkins may be to give the investment bank more time. Shareholders and the new chairman may not be so patient.

How eurozone QE is reshaping the bond markets

If Europe’s economy remains in crisis, then someone please tell the bond markets. The ECB’s asset purchase programme has driven half of the EU’s sovereign debt pile into negative yield territory. And Draghi’s plan has only just started. Funds see little choice but to follow the QE monster on its path of destruction through the yield curve. Will that lead to the surreal outcome of all EU sovereigns yielding the same, regardless of credit quality?

Have Wall Street banks gone subprime at the wrong time?

Wall Street is praying that the US economy will land softly now that the Federal Reserve has pricked the housing market bubble, because it will be bad news for mortgage origination if house prices stall for long or, even worse, fall. Already there are early signs of credit deterioration in some of the riskier mortgage securitizations. It can only be a matter of time before subordinated CDO tranches start to take a hit. Alex Chambers reports from New York.

How Europe's governments have enronized their debts

Europe's government bond markets are built on a lie. Ministries of finance have adopted corporate financing techniques to give a false impression of their true debt levels. Regulators appear unwilling or unable to do anything about it. Investors and taxpayers ought to know. Mark Brown and Alex Chambers reveal all.

Best investment bank 2015: The reinvention of Morgan Stanley

Under the leadership of James Gorman, Morgan Stanley has carved out a unique position in global banking. It remains a great investment bank. Its much-maligned FICC division now looks fit for purpose. And its US wealth management arm gives the firm new stability and strength. Most important of all, the disparate parts of a once-divided business are delivering the benefits of the whole firm. And the markets are starting to realize the potential of a new Morgan Stanley as well.

The great bond liquidity drought...and how to fix it

Liquidity in the world’s bond markets has reached crisis point. Investors can no longer rely on banks to provide a crucial intermediary function in the secondary markets. It is time those fund managers started to think about providing that liquidity among themselves. If they do not, the consequences for the whole of the financial markets might be disastrous.

Money and mystery: Adia unveils its secrets

Abu Dhabi Investment Authority is one of the world’s biggest institutional investors. It is also one of the most guarded. It publishes no numbers. It seldom makes any public statements. In a rare interview, two of its most senior officials lift the lid on the organization, revealing the reasons for its success. Sudip Roy reports from Abu Dhabi.

SS Euro - sinking the unsinkable

This is the risk they won't talk about in Brussels, Bonn or Paris - that monetary union, once entered into, goes horribly wrong, scuppering the SS Euro. Prudent financial management demands that the risk of failure, exit by one country or dissolution should be considered. Research suggests it isn't negligible and that its consequences for financial contracts and exposures will be devastating. David Shirreff reports.