Regs Threaten European Structured Products, Bonuses

European structured products and bonuses for the bankers who staff the market are in jeopardy because of a new accounting rule that bars upfront recognition of profits.

  • 04 Mar 2005
Email a colleague
Request a PDF

European structured products and bonuses for the bankers who staff the market are in jeopardy because of a new accounting rule that bars upfront recognition of profits.

As it stands, International Accounting Standard 39 means non-U.S. banks are less likely to execute exotic trades and won't have the upfront profit with which to pay bonuses, say officials. The rule is likely to hit European banks hardest because they rely on structured products for a large proportion of their profits.

The International Accounting Standards Board rule is harsher than the U.S. equivalent, which allows fair value of trades with an observable market value, according to officials. The issue is heating up now because market participants will discuss proposed amendments to the so-called fair value rule that would bring it in line with the U.S. at an IASB roundtable next week. Pauline Wallace, partner in the IFRS services team at PricewaterhouseCoopers in London, said she is optimistic the roundtable will lead to the adoption of an amended IAS 39.

But derivative structurers and sales officials fear even an amended IAS 39 may hinder innovation. Traders say relying on observable market values to book profits means they will not be rewarded for complex high-margin trades which are not liquid. Accountants however, counter the U.S. has not seen a drop-off in innovation under its equivalent rules (DW, 1/11/04).

The problem, however, which is perhaps closer to the hearts of traders, is remuneration. One senior derivatives pro said banks will have to figure out a way of rewarding employees when the bank itself has not received the full profit for the trade.

  • 04 Mar 2005

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Citi 241,652.19 924 8.19%
2 JPMorgan 223,721.63 996 7.58%
3 Bank of America Merrill Lynch 216,064.78 722 7.32%
4 Barclays 184,894.55 671 6.27%
5 Goldman Sachs 158,954.58 518 5.39%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 JPMorgan 32,522.19 61 6.56%
2 BNP Paribas 32,284.10 130 6.51%
3 UniCredit 26,992.47 123 5.44%
4 SG Corporate & Investment Banking 26,569.73 97 5.36%
5 Credit Agricole CIB 23,807.36 111 4.80%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Goldman Sachs 10,167.68 46 8.81%
2 JPMorgan 9,894.90 42 8.58%
3 Citi 8,202.25 45 7.11%
4 UBS 6,098.17 23 5.29%
5 Credit Suisse 5,236.02 28 4.54%