Dilution of Sir John Vickers’ recommendations looks to be a lobbying victory for the big banks
There are two important points to remember about the Vickers report on banking reforms. First, it was presented as a pragmatic compromise. The commissioners were trying to ensure that the UK’s banking system could never again threaten to sink the economy and UK taxpayers but, at the same time, they had an eye on banks’ long-term competitive position and their ability to serve the economy. Thus ringfencing of retail operations within banks, rather than full separation, was judged to offer the best solution from a cost/benefit perspective.
Second, Sir John Vickers, who chaired the panel, said the recommendations were not a menu of options for the government – they were intended to be adopted in full.
It is alarming, therefore, to see further compromises slipping into the reforms after nine months of contemplation by the government. Leverage ratios for big banks will be lower than Vickers advised – instead of a 4% ratio of pure equity to gross assets, 3% will be allowed. Why? Well, 3% is the international norm, as determined by the Basel regulators.
The dilution of Vickers’ idea looks to be a lobbying victory for the big banks, especially HSBC and Standard Chartered, who play primarily on foreign fields and were grumbling most loudly about the threat to their ability to compete.
But remember the specific nature of the UK banking crisis: it was so acute because the banks were so large in relation to the size of the UK economy. There should be a sound reason, then, for going further than international standards – the little old UK needs extra protection from the risks presented by so many giant banks.
Vickers made the point in his response to the government’s plan. “The white paper proposals are far-reaching, but on some points – such as limits on the leverage of big banks – we believe they should go further.”
NEW YORK (TheStreet) — To make the largest deal in its 126-year history an earnings boost, Johnson & Johnson is keeping its acquisition of Synthes as far as from the U.S. taxman as possible.
After receiving regulatory clearance for its $19.7 billion acquisition of Swiss medical device maker Synthes, Johnson & Johnson says the mega-deal will add to earnings per share after previously forecasting dilution: All with the help of bankers JPMorgan Chase and Goldman Sachs. …
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Read more: Johnson & Johnson’s Synthes Deal Revives Foreign Tax Debate
Facebook (FB) shares change hands at $44.10 in their final SharesPost auction, as the company shuts down private-exchange trading ahead of its IPO. The closing price translates into a valuation of $104B, or perhaps $110B+ after factoring IPO dilution. Separately, SharesPost rival SecondMarket is laying off 10% of its staff, as it copes with both Facebook’s offering and a broader pickup in tech IPO activity. 3 comments!
View post: Facebook (FB) shares change hands at $44.10 in their final SharesPost auction, as the company shuts down private-exchange trading ahead of its IPO. The closing price translates into a valuation of $104B, or perhaps $110B+ after factoring IPO…
Updated to reflect additional analyst commentary starting in third paragraph
NEW YORK (TheStreet) — Google’s success in snaring approval by regulators on its $12.5 billion purchase of Motorola Mobility is an important battle victory in Silicon Valley, but industry analysts argue that it may point to a costly Cold War of attrition that will sap earnings power from the search- engine giant over the long term.
The unpredictability of Motorola Mobility’s patents in future litigation, its projected dilution to Google’s profit margins and overall acquisition size are cause for concern that the deal may be a major misstep for first year CEO Larry Page.
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Originally posted here: Google Wins Motorola Battle, but Shareholders May Lose the War (Update 1)