SO HERE WE are, nearing the end of yet another event-filled year in investment banking and capital markets. Historians may look back at the themes and stats of 2014 and find little to get unduly excited about – yet the impact of continued zero interest rates and the interplay and tension between spluttering economic, business and banking cycles were, in their own idiosyncratic ways, fascinating if occasionally frustrating spectacles.
Beneath that broad canopy, efforts to right-size the banking sector, achieve the right regulatory balance, and neutralise banks’ ability to unleash Armageddon were similarly enthralling.
Over the course of the year, I’ve attempted to capture many of the grand themes and many of micro issues at play in the broad investment banking universe. I’ve upset a fair few people along the way by saying what I thought and calling a spade a spade. I make no apologies for that. If, in the process I’ve pricked some pomposity, pierced some pretentiousness or punctured some posturing, I reckon I’ve done my job. (And yes, all of those things were present in abundance …)
People tell me I’ve been a bit mean to regulators. And they’re probably right. I’m aware that regulating global banking today is something of a hiding to nothing and that the much-vaunted level regulatory playing field is as much of an aspiration today as it always will be. But I’ve been concerned for some time about the dangerous political cross-currents at play in the regulatory debate, some twisted ratiocination and in some cases the lack of a clear end-game. Unclear objectives and woolly thinking have led to some serious unintended consequences and I fear more will emerge as the story unfolds.
Even worse: they’re actually intended consequences. Rendering large parts of banking uneconomic through punitive capital and other charges, or banning certain products or practices outright may have been justified in some cases but tying banks’ hands behind their backs and denting their profitability will do little to incentivise them to take up their rightful place in financing the global economy. After all, if it’s about anything, it’s about creating growth and jobs and giving us all the wherewithal to seek prosperity, right?
We’re still betwixt and between with regard to banking regulation and the recalibration of the banking strategies set in motion to take account of the new world. But I do sense we’re nearing the end of the second act of a three-act play and that the new normal is slowly coming into view. In that context, I look forward to seeing how 2015 unfolds and how the myriad themes out there play out.
As the annual IFR awards, our annual swansong and the standards of excellence for the capital markets industry, are out, I figured I’d end the year with a few of my own awards, intended to capture the major talking points of 2014 with a smile, to send everyone into year-end with some good cheer. Back in January.
The 2014 Alternative Awards | |
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Award | Winner |
Category: Macro | |
The Central Bank ‘Whoops!’ award | ECB, for stoking a huge speculative bubble in financial markets while failing to create monetary transmission or kill deflationary tendencies |
The ‘will you just get on with it’ award | ECB. for dithering over QE |
The ‘why can’t you screw over someone else’s market instead’ award | ECB, for CBPP3 (specially presented by the Covered Bond market) |
Most under-whelming monetary act of the year | ECB, for its Asset-Backed Securities Purchase Programme |
Special award for the sheer amount of time wasted on something that didn’t happen | Federal Reserve, for roiling markets all year and causing the research community to produce truly colossal amounts of analysis of the impact of higher 2014 US rates on every market in the world |
Biggest disconnect of the year | Geopolitical conflict/war/stuttering growth vs global equity prices |
Category: Regulatory | |
Most unattainable proposition | Level playing field for global bank regulation |
Biggest confidence trick of the year | Regulators pretending they give a damn about the above |
Wonkiest regulatory decision | FCA for fining and banning Mark Stevenson for buying bonds to make the price go up |
Biggest wasted opportunity | Testing the impact of senior bail-in over Banco Espirito Santo collapse |
Biggest unintended consequences award | Gold: Monetary authorities, for fueling market speculation |
Silver: Same, for forcing banks to crimp lending due to high capital levels | |
Bronze: Killing bond market liquidity and taking price discovery with it | |
Honourable mention: Banks ramping up salaries to circumvent pay caps | |
Storing up trouble for the future award | Risk transfer to the shadow banking sector |
Snouts in the trough award | Global regulators, for fine inflation |
Sweetest irony of the year | Regulatory obsession to kick-start securitisation |
Biggest kick in the nads for G-SIBS | TLAC |
Biggest capital fight of 2015-16 | TLAC vs MREL |
Biggest snore fest of the year | Results of ECB stress tests |
Category: Thematic | |
Most boring debate | Seminal vs cyclical |
The ‘you’ve made your point now shut up’ award | Regulators and politicians, for their obsession with comp |
The ‘Get over it’ award | Bankers: you’re still paid a multiple of most other people in the world |
Biggest over-arching repeat theme for 2015 | Hunt for yield |
Special prize for annoying righteousness | UK’s Banking Standards Review Council |
Prize for blatant ridiculousness | Royalty and the super-rich promoting inclusive capitalism |
The ‘it’ll never happen’ award | Bond market funding small companies |
The ‘we’re not getting there any time soon’ award | European capital markets structurally mirroring their US counterpart |
The ‘It’ll never happen again’ award | Global investors, for buying anything with yield and to hell with the consequences |
The ‘It’s dead … No it isn’t. Is it?’ Award | FICC |
The ‘RIP it’s definitely dead’ award | Bond market liquidity |
The ‘it just got a bit complicated’ award | Bond syndication |
The ‘It really washes whiter’ award | All banks, for their constantly re-invented “client-focused strategies” |
The ‘I don’t think so’ award | Capital markets taking over global infrastructure funding from banks |
They know each other too well to get along | ECM bankers and independent advisors |
Category : Product | |
Investment Bankers Contributing to Society Award | Green Bonds |
Most turbo-hyped product of the year | Gold: Green Bonds |
Silver: European Private Placements | |
Bronze: Institutional/non-bank lending | |
Biggest product misnomer of 2014 | High-yield’ bonds |
Most egregious example of the sign of the times | US$100bn-plus book on Numericable/Altice bond |
Biggest investor 180 degree turn of the year | Additional Tier 1 instruments |
The ‘yet another false dawn’ award | M&A |