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Issuer's £280m deal was cleverly marketed
With equity returns under strain, managers would do well to slow the pace of CLO issuance
Issuance has kept going by giving investors just what they want
John Healey resigned because the money was not there for defence. It may not be there for anything
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Libor has become the latest whipping boy of the financial markets. It’s volatile. It doesn’t have the same relationships with other products it used to. It may even be being manipulated. But calls to scrap Libor as the main reference rate are at best naïve, at worst stupid. Put simply, Libor is too ubiquitous to be replaced. And in a broken financial system, it would be a miracle if Libor wasn’t broken.
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Failings in risk management models, ill-conceived bonus payments, the perils of cheap intra-bank liquidity and a headlong rush to build a CDO business: the catalogue of errors UBS owned up to this week is a manual of how not to run a bank. It also confirms that the losses at Dillon Read Capital Management were only a small part of the problem — the investment bank itself was responsible for most of the losses.
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Libor has become the latest whipping boy of the financial markets. It’s volatile. It doesn’t have the same relationships with other products which it used to. It may even be being manipulated. But calls to scrap Libor as the main reference rate are at best naïve, at worst stupid. Put simply, Libor is too ubiquitous to be replaced. It’s also worth pointing out that in a broken financial system, it would be a miracle if Libor wasn’t broken.
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Sir Fred Goodwin is right to make a speedy U-turn and raise capital ratios at RBS. The bank has been able to get away with low capital ratios in the past because of its high profitability, but investors should welcome a more conservative approach amid stormy global credit markets and a deteriorating UK economic outlook.
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The hybrid corporate bond market was, up until the credit crunch, gaining increasing popularity. For issuers, it offered the possibility of raising equity-like instruments at competitive costs while for investors it meant juicy spreads and apparently little risk. Times, however, have changed and with the crunch biting, it’s not just the banks that have suffered, some corporates are finding themselves in a tricky corner, and suddenly those hybrids are starting to look a little bit ugly. However, no investor can say that they had not been warned. Flexibility was always going to be what these instruments were there for.
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Failings in risk management models, ill-conceived bonus payments, the perils of cheap intra-bank liquidity and a headlong rush to build a CDO business: the catalogue of errors UBS owned up to this week is a manual of how not to run a bank. It also confirms that the losses at Dillon Read Capital Management were only a small part of the problem — the investment bank itself was responsible for most of the losses.