Macaskill on Markets

A US climate bill filled with green credits will create business for banks and provide relief from the backlash against ESG products.

West Virginia state treasurer Riley Moore has opened another front in a campaign by Republican officials in the US against banks that promote ESG policies.

HSBC Asset Management’s head of responsible investing has had it up to here with consultants and regulators lecturing him on climate change risk.

Stock analysts have long been mocked for their fawning attitude towards bank CEOs and CFOs on earnings calls. The phrase ‘great quarter, guys’ as an opening gambit became such a cliché that most analysts eventually toned down their approach, and some – led by self-appointed scourge of Wall Street Mike Mayo – have even started showing open scepticism about the corporate bromides delivered by bank executives.

As the World Cup shapes up to be the main sporting event of 2014, Euromoney columnist Jon Macaskill looks at comparisons between investment banks and football teams for clues to competitive match-ups in the year ahead.

Litigation cost estimates for investment banks are being revised sharply upwards after JPMorgan shocked peers by revealing that it had set aside $23 billion of legal reserves, then agreed a $13 billion settlement of outstanding mortgage claims with the US authorities.

The final version of the Volcker rule is unlikely to give posterity phrases that echo through the ages in the style of the King James Bible, but the details of its wording are important to financial market participants, which helps to explain the extended bickering.

Forward-thinking branding experts are already adjusting their plans for 2014 and beyond: Yahoo recently unveiled a new logo designed to symbolize its fresh start under CEO Marissa Mayer; and the Republic of Iran is reportedly considering a change to the slogan ‘Death to America’ that has been in place since the revolution in 1979.

Ashok Varadhan might well be the most unpopular man at Goldman Sachs as bonus time approaches. The global head of macro trading at the firm oversaw a third-quarter collapse in revenues in his product lines – which include foreign exchange and rates – that was dramatic enough to threaten lower annual compensation levels for everyone else at Goldman Sachs.

Regulatory sanctions are coming thick and fast at JPMorgan, with a record $11 billion fine for mortgage-market abuses in late September drawing the most attention. But reports accompanying JPMorgan’s $920 million penalty for failures surrounding its $6.2 billion London Whale loss also shed new light on the distrust and paranoia within the bank.

There has been widespread condemnation of the manipulation of Libor settings by employees of interdealer broker Icap, and rightly so. But the time has surely come for defenders of former Icap employee Colin Goodman, aka Cash Broker A, aka Lord Libor, aka Lord Bailiff, to step forward.

The untimely death of an intern at Bank of America prompted a spate of headlines about the long hours worked in the City of London and Wall Street. Forcing junior staff to put in exceptionally long hours is clearly counterproductive in any sector of banking, as it is in other industries. But the practice reaches a peak of pointlessness in corporate finance, where the Bank of America intern worked. Pure corporate finance, such as mergers and acquisitions or advisory work, is the area in the City where the greatest nominal effort is applied to the least practical effect.

The recently discovered regulatory zeal for a focus on gross leverage ratios at banks, rather than capital assessed on risk-weighted assets, is creating a new set of problems for some of the biggest dealers. Barclays and Deutsche Bank in particular have been put on the back foot by the regulatory bait and switch, which comes at an awkward time – just as key engines of their profitability, such as rates trading, are sputtering.

The end of the commodities super-cycle of rising prices is being accompanied by a series of humiliating reverses for some of the biggest bank traders in the energy and metals markets. These banks might struggle to retreat to a sustainable, client-based commodities business model, given over-ambitious former revenue targets, the over-sized egos of some of the main players involved, and the extent to which they have alienated customers and regulators.

The jump in treasury yields in late June prompted the two highest-profile US bond gurus to make public pronouncements designed to calm the nerves of their acolytes.

The bond market tremors of late June maybe do not signal an impending fixed-income earthquake, but they do demonstrate the challenges banks face in maintaining revenue streams as investors adjust to the prospect of higher rates.

Bloomberg brought a knife to a gunfight when it tried to pry information out of Goldman Sachs by using details gathered from the data and media firm’s terminals about the bank’s employees. An enquiry by a Bloomberg reporter about whether a partner had left Goldman, given that his terminal was not in regular use, set alarms bells ringing at a bank that has a well-deserved reputation for paranoia.

Jamie Dimon comfortably survived an attempt to split his combined chairman and CEO role at JPMorgan, which will allow him to set the terms of his eventual departure from the bank. He should start by appointing a president to give a potential successor a trial run.