The FIG Idea: Dear Santa
What's on a bank CFO's Christmas list
Thanks for the presents last year. I passed the stress tests, issued some capital and even made a decent profit. The world didn't fall apart, even with surprises in the US presidential election and the UK Brexit referendum. In fact, as we saw again after the Italian referendum, the markets in 2016 have proven incredibly robust. Thank you, thank you, thank you.
This year, I'm asking for another sackful — sorry if that appears greedy!
We've been talking about this for years now. Thing is, I really need to know, one way or another. I'm trying to make strategic decisions and a step-change in regulatory risk weights makes a lot of difference. I'd rather there wasn't a Basel IV — I personally don't have a problem with internally modelled risk weights — but please can we just have the rules already?
Data on IFRS 9
My teams are nearly ready to give me the IFRS 9 numbers, but I'd love to have some benchmarks. We're having to make so many assumptions and judgements, I'm trying to be reasonable and conservative but it would reassure me to know others were doing likewise.
Some political stability
Democracy is great, and change is fine, but this year we've taken on a lot and it would be nice to have 2017 as a year of consolidation and taking stock. On that note...
An amicable Brexit
It's the world's fifth largest economy and home to Europe's largest financial centre. Let's hope the EU and the UK can agree reasonable divorce terms. Otherwise, it's the kids that'll lose out — in the financial sector, that means my bank.
Goldilocks rate rises
If tapering has to start now, please let it be gentle. Many sectors have been looking forward to rate rises — my net interest margin relies on them— but rapid tapering of quantitative easing could be harmful for many sectors. Not too slow please, but not too fast!
I've got a lot of debt to issue next year, for TLAC purposes. It should be fairly inexpensive. But the volumes are so significant that I'm really reliant upon markets being open and constructive.
Fairness to incumbents
Many official policies give a boost to new entrants into the banking sector. This may spur competition but it also risks damaging the industry's financial solidity through fragmentation and corner-cutting. My business is big and ugly because that's the way we made it. Please don't lower the bar for racier models — the results will be worse.
Santa, the last present I'd like is my main one. Please please please I'd like to do a share buyback. I'm shrinking in some unprofitable businesses, and there aren't too many strong M&A opportunities, so this seems the best thing for shareholders. The regulator isn't keen but can see the sense in the idea. And it would make my owners happy, they’d love to get some of their invested capital back.
So there you have it, Santa. Nothing flash, just stability and progression. I'd be so happy if you were able to squeeze down the chimney with these presents in your sack.
Bank CFO, aged 53 3/4