Tag Archives: HSBC

EU To Investigate CDS Manipulation by Major Banks

Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM) and 14 other investment banks face a European Union antitrust probe into credit-default swaps (CDS) for companies and sovereign debt, Bloomberg.com reports. Well, at the moment no one can say for sure who’s manipulating who.

“I hope our investigation will contribute to a better functioning of financial markets.”

 Joaquin Almunia

CEO Lloyd Blankfein of Goldman Sachs

It may just be my twisted, suspicious mind, but there’s some red lights flashing in the back of my head. Just a few week’s ago about 200 European economist’s and financial experts made a formal request to the EU parliament to conduct an investigation of the Greek national debt. This was followed by a suggestion by the Greek government to probe the financial markets instead.

“Blame the speculators,” have also become like a mantra to the EU leaders during the crisis that they have no idea on how to manage.

In that particular light, this new investigation comes as no surprise.

I have just asked Markit to comment on the allegations, and are still waiting for their reply.

In the meantime, this is what Bloomberg reports:

The European Commission said today it opened two antitrust probes. It will check whether 16 bank dealers colluded by giving market information to Markit, a financial information provider.

It will also examine whether nine of the firms struck deals with ICE Clear Europe, a clearinghouse for derivatives, that block other clearinghouses from entering the market and give rivals “no real choice where to clear their transactions.”

“Lack of transparency in markets can lead to abusive behavior and facilitate violations of competition rules,” said Joaquin Almunia, the EU’s antitrust chief, in an e-mailed statement. “I hope our investigation will contribute to a better functioning of financial markets.”

Global regulators have sought to toughen regulation of credit-default swaps saying the trades helped fuel the financial crisis.

Lawmakers in the EU plan to encourage the use of clearinghouses and transparent trading systems. CDS are derivatives that pay the buyer face value if a borrower defaults.

Possible Collusion

JPMorgan, Bank of America Corp. (BAC), Barclays Plc (BARC), BNP Paribas (BNP) SA, Citigroup Inc. (C), Commerzbank AG (CBK), Credit Suisse Group AG (CSGN), Deutsche Bank AG (DBK), Goldman Sachs, HSBC Holdings Plc (HSBA), Morgan Stanley, Royal Bank of Scotland Group Plc (RBS), UBS AG (UBSN), Wells Fargo & Co. (WFC), Credit Agricole SA (ACA) and Societe Generale (GLE) SA will be investigated for possible collusion in giving “most of the pricing, indices and other essential daily data only to Markit.”

The commission said this “may have the effect of foreclosing the access to the valuable raw data by other information service providers.” It said some of the clauses in Markit’s licence and distribution agreements “could be abusive and impede the development of competition in the market for the provision of CDS information.”

The EU will also separately investigate credit default swap clearing and deals struck by ICE Clear Europe with Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Morgan Stanley (MS) and UBS.

These agreements have clauses on preferential fees and profit sharing arrangements “which might create an incentive for the banks to use only ICE as a clearinghouse,” the EU said. That may block other clearinghouses from starting up and limit choice for CDS dealers, it said.

Giles Croot, a spokesman for Barclays, wasn’t immediately available for comment when contacted by Bloomberg.

Deutsche Bank spokesman Ronald Weichert declined to comment as did Commerzbank spokesman Reiner Rossmann.

The probe will also cover fee structures used by ICE to check if they give “an unfair advantage to the nine banks by discriminating against other CDS dealers.”

Stay tuned for updates!

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The Precious Irish Bondholders – Here's The Full List

The players in the European credit market are scared senseless by the proposal of channeling some of the losses in the financial sector over to them,  a so-called “Bail-In”.  The element of haircut for bondholders is particular relevant for Ireland who’s banking industry is the main problem. Well, here’s some examples of poor Irish bondholders: Goldman Sachs, HSBC, Deutsche Bank (Asset Management), Alianz, AXA, BNP Paribas, Royal Bank of Scotland, Barclays, Credit Suisse, just to mention a few… You’ll find the full list below.

“Every child in Ireland is being bequeathed a huge debt at birth to protect the interests of foreign, mainly German, bondholders – why?”

Guy Fawkes‘ Blog

BIG BANKERS: Lloyd Blankfein, Kenneth Irvine Chenault, Kenneth Lewis and Edward Yingling.

Anglo-Irish Bank do hardly represent a serious systemic risk to the Irish economy, certainly not to the same degree as AIB or the Bank of Ireland. And if it had been allowed to follow Lehman Brothers,  the shareholders and bondholders would probably have been the only ones to lose money.  However, the Irish government is seeking a way to protect their precious bondholders.

“Every child in Ireland is being bequeathed a huge debt at birth to protect the interests of foreign, mainly German, bondholders – why?”

This interesting question is raised in a recent post at the Guy Fawkes’ Blog.

The Irish state stepped in and nationalised a bank that was basically run by “crooks lending to property speculators,” the blogger writes.

Pointing out that the Irish people are taking the losses that rightfully should have been on the shoulders of the bondholders.

Once upon a time it sometimes happened that  a bond issuer defaulted. And it was seemed as a natural part of the risks investors take.

Yeah, well, times have obviously changed.

One can only wonder why Dublin’s political establishment is so keen to protect foreign investors at the expense of future generations.

The list below of foreign Anglo-Irish bondholders was originally obtained by an Irish bond trader, updated per November 15, and first published at the Guy Fawkes’ Blog.

These are the people whom Dublin’s politicians really seem to care so deeply about – I guess the names are somewhat familiar?


(h/t: Guy Fawkes’ blog)

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These Companies Stands To Benefit The Most From BP's Misfortune

Markit Research have made an analysis of which companies they belive will provide the most significant payouts in the absence of BP’s dividend. BP’s dividend suspension in June meant that investors would forego an estimated £7.8 billion in dividends this year. However, there are significant income opportunities from other stocks, according to the report. Markit expects that dividends from just five companies in the FTSE 100 will constitute over 60% of all those paid between now and BP’s next anticipated dividend in February 2011.

“The fact that recent market rumours suggesting BP might bring forward its planned resumption of dividend payments have received so much media attention is emblematic of its importance to investors and highlights the perceived scarcity of major dividend paying stock alternatives.”

Markit Dividend Research


“Markit is forecasting a yield of over 4% on the FTSE 100 over the forthcoming year. So despite the latest CPI annual inflation figures for August remaining stubbornly high at 3.1% and interest rates not looking likely to increase any time soon, real returns from income stocks appear achievable,” the two analysts Thomas Matheson and Arjun Venu writes in the latest edition of Markit Dividend Research.

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BP’s dividend suspension in June meant that investors would forego an estimated £7.8 billion in dividends this year. In the absence of this payout, however, there are significant income opportunities from other stocks, according to the report.

“In fact, Markit is forecasting a yield of over 4% on the FTSE 100 over the forthcoming year. So despite the latest CPI annual inflation figures for August remaining stubbornly high at 3.1% and interest rates not looking likely to increase any time soon, real returns from income stocks appear achievable,” Matheson and Venu says:

“Markit expects that dividends from just five companies in the FTSE 100 will constitute over 60% of all those paid between now and BP’s next anticipated dividend in February 2011. This report briefly reviews Markit’s forecasts for each of these companies. For three of these stocks we are expecting dividends to continue to grow, while for the remaining two we expect dividends to remain flat.”

And here they are; the five companies whose shareholders will benefit the most from BP’s misfortune:

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* Royal Dutch Shell
“The biggest contribution is expected from Royal Dutch Shell, whose payouts will represent just over a quarter of all dividends paid by FTSE 100 companies between now and February. So far in 2010 Shell has managed to maintain its dividend at the 2009 level of $0.42 per quarter and Markit fully expects this to continue for the rest of the year. In addition to cutting costs, Shell has seen positive trends in oil and gas volumes help to improve earnings and cash flow.

* AstraZeneca Plc
“Markit forecasts AstraZeneca’s 2nd interim payment to grow 6.4% to $1.82, which will constitute 12.7% of all dividends on the index. The healthcare behemoth reported strong first half results and raised its full year earnings forecast for the third consecutive time this year. The company also received backing from the FDA advisory panel for potential “blockbuster” drug Brilinta which has boosted the potential future pipeline and eased worries over numerous upcoming patent expires.”

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* Vodafone Plc

“Vodafone has committed to increasing its dividend by 7% per annum over the next two years and its FY11 interim dividend is expected to amount to a payout of almost £1.7 billion. Markit is forecasting an interim dividend of 2.85 pence per share, which will make up 11.2% of all FTSE 100 dividends between now and February.”

* HSBC Plc
“Despite being cut 39% last year, HSBC’s dividend remains substantial. HSBC’s capital position comfortably exceeds the requirements of Basel III and the company has given guidance that it intends to pay a Q3 dividend of $0.08 in line with its existing policy, amounting to 6.8% of dividends on the index.”

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* GlaxoSmithKline Plc
“The largest healthcare company in the UK, GlaxoSmithKline has delivered sustained dividend growth throughout the last decade. Markit is forecasting for this to continue with a Q3 dividend of 16.0 pence, up 6.7% from last year. This payment would make up 6.3% of all FTSE 100 dividends. The first half of the year saw sales grow 7% to £14.4 billion and net operating cash flows jump 21% in sterling terms to £4.2 billion, supporting this growth.”

Here’s a short-version of the report.

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