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EDITOR'S
LETTER
I
THIS
MONTH
Another fine mess, but who's to blame? Brian Caplen BANKS HAVE CERTAINLY BEEN GUlLTY OF MAJOR TRANSGRESSIONS
OVER THE PAST
FEWYEARS but that doesn't make the scale of the ensuing fines they have received any more explicable. Who decides how large they are and where the funds end up? Is there a rational system for administering them or is the process politically driven? ln this month's cover story, Paul Wallace investigates bank fines and tries to make sense of what is going on. To read his conclusions please turn to page 18. M bank fines have largely been a G-SIB phenomenon (global systemically important banks), this may not be the leading topic of conversation at this month's annual meeting ofthe lnter-American Development Bank in Brazil. Participants have other things on their minds. After several years ofbuoyancy, major regional economies such as Brazil, Argentina and Chile are now facing headwinds, as Silvia Pavoni reports on page 56. By contrast, prospects for Mexico with its reform programme appear better, as do those for Colombia, which is looking forward to a peace dividendo ln an interviewwith The Banker, Colombian president Juan Manuel Santos describes the country's successes and future challenges he would like to overcome ifhe is re-elected (see page 62). To complete our Latin American coverage we also look at the consolidation in the Colombian banking sector (page 58), we have an economists' roundtable on page 64 and a ranking ofthe Top 100 Central American banks (page 70). ln other regional coverage we report on the brighter outlook for Spanish banks (page 48), the German coalition's ta.ke on a eurozone banking union (page 52) and on how EU accession has failed to ignite Croatia's economy (page 54). There is an update on Jordan's banks (page 80) and we interview
Nigeria's finance minister Ngozi Okonjolweala (page 84). The former chairman of the China Bank Regulatory Commission, Liu Mingkang, discusses economic reform in China in a Viewpoint on page 10. ln our capital markets section, Philip Alexander interviews Alexis de Rosnay about his plans for the mid-market investment bank Canaccord Genuity (page 24) and our Team of the Month is the sovereign, supranational and agency (SSA) team at Deutsche who have scored with their deals for the European lnvestment Bank and lreland (page 26). We also have an SSA roundtable (page 34) as part of our special report on debt capital markets, which kicks off with an article on the challenge ofbuilding liquidity in corporate bond markets (page 30). Finally, Jane Cooper interviews payments guru Kevin Brown on the eve of , his planned retirement from Royal Bank - ,.~ ofScotland (page 92) and looks at the competitive landscape in stock and derivatives exchanges (page 42). Gll BRIAN
CAPLEN
EDITOR
ff
COTA'kb~Ă Y _J
N?EX.
COMPRA WHO DECIDES HOW LARGE CBANK FINES] ARE AND WHERE THE FUNDS END UP?
Is
THERE A
RATIONAL SYSTEM FOR ADMINISTERING THEM OR IS THE PROCESS POLITICALLY DRIVEN?.
March
2014
I THE
BANKER
I
1
CONTENTS
TheBanker ESTABLISHED 1927 VOLUME 163 NUMBER 1058
THIS MONTH'S HIGHLIGHTS ................................................................................................. ..............................................................................................
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Tel: +44 (0)20 7775 plus extension (unless otherwise stated) EDITORIAL • Editor: Srian Caplen: 6364. brian.caplen@ft.com • Senior Editor, Investment Sanking and Capital Markets: Philip Alexander: 6363. philip.alexander@ft.com • Editor Emeritus: Stephen Timewell: +44-7764617824, stephen.timewell@ft.com • Economics Editor. Silvia Pavoni: 6366, silvia.pavoni@ft.com • Atrica Editor, Capital Markets Writer: Paul Wallace: 6361, paul.wallace@ft.com • Technology and Transaction Banking Editor: Jane Cooper: 6325. jane.cooper@ft.com • Head of Research: Guillaume Hingel: 6369, guillaume.hingel@ft.com • Dalabase Publisher: Adrian Buchanan: 6370, adrian.buchanan@ft.com • Editorial Logistics: Simon Duffy: 6359, simon.duffy@ft.com • Contributing Editor.s: Edward Russell-Walling, Nick Kochan, David Lane, Frances Faulds, Michael Marray, Jane Monahan, Dan Sarnes, Joanne Hart, Michael Imeson, James Gavin, Peter Wise, David D'8yrne, David Wigan, Charles Smith, Jules Stewart PUBLlSHERS • Publishing Director. Angus Cushley: 6354, angus.cushley@ft.com ADVERTISING • International Sales Manager. Adrian Northey: 6333, adrian.northey@ft.com • Associate Publisher.s: • Andrew Campbell (technology): 6317, andrew.campbell@ft.com • Philip Church (Asia and Atrica): 6328, philip.church@ft.com • Luke McGreevy (Middle East and north Alrica): +97143914398, luke.mcgreevy@ft.com • Anton Paul (central and eastern Eurape): 6355, anton.paul@ft.com • Tanny Ribeira (Latin America): +351918 669188, tannyribeira@yahoo.com PROOUCTION ANO OESIGN • Praduction Editor: Richard Gardham: 6367, richard.gardham@ft.com • Deputy Production Editors: Andrea Crisp: 6338, andrea.crisp@ft.com Helen Wilson: 6918, helen.wilson@ft.com • Art Editor: Lisa Sheehan: 6539, lisa.sheehan@ft.com • Head of Production: Denise Macklin: 6557: denise.macklin@ft.com • Global Operations Director - Magazines: Peter Slaughter: +44 (0)20 7873 3267, peter.slaughter@ft.com MARKETING, SUBSCRIPTIONS ANO CLIENT RELATIONS Senior Marketing Manager: Raj Rai: 6340, raj.rai@ft.com Head of Circulation: Kevin Phillips: 6551. kevin.phillips@ft.com Head of Online Publishing & Marketing - Global Finance: Davinia Powell: 6449. davinia.powell@ft.com Subscriptions and Customer Services: FinancialTimes Business,CDSGlobal.SovereignPark,POBox5891.Mar!<etHarborough, leicestershire.lE947ZT Tel:+44 (0)1858 438 417,lax: +44 (0)1858 461873; e-mail: ft@subscription.co.uk Printers: WyndehamRachelimited Distribution: SeymourDistribulion limited, 2 EastPoullry Avenue,london, EClA9PT. Tel:+44 (0)20 74294000, Fax:+44 (0)20 74294001 Reprintsareavai~ble01anyTheBankerarticle,with your companylogoandconlactdetaís inserted il required(minimumarder100copies).Fordelailstelephone+44 (0)2078734816.Forone·off copyrightlicenceslor reproductiOl101TheBankerarticlestelephone+44 (0)2078734871. Attemative~,lor bolh servicesemailsynd~dmin@ft.com Regislered Number: 00202281 (England and Wales) ISSN: 0005-5395 ® Financial Times 2014. lhe Bankerisatrademar!<01 RnandalTimeslimlted 2014."RnaneialTimes"and"FT"areregistered b"ademarksandservicemarks01 lhe RnancialTimesltd.AlI rightsreserved.Nopart01 Ihispublicalion maybereproducedar usedinanylorm of advertisingw"hout priorpermissioninwritingIromthe editor.Norespoosibilityfor Iossoocasionedto anypersonactingor relrainingIrem actingasa resull01 materialinthis publicatiOl1 canbeaccepted.Onanyspecificmatter,relerenceshouldbemadeto an apprepriateadv~er.Registeredoffice:NumberOneSoulhwarkBridge,london SEI9Hl, UK
2
I THE
BANKER
I March
2014
COVERSTORY
18
Over the past two years banks have been hit by a huge wave of litigation and it seems that the regulators are far from finished when it comes to dishing out fines,
REPORT: DEBT CAPITAL MARKETS
29
The Bankeis special report on debt capital markets examines how the new liquidity landscape is affecting corporate bond market participants (page 30) and government issuers (page 34),
IN FOCUS: IATIN AMERICA
56
Latin America is no longer a straightforward growth story. The Banker examines how some of its largest economies have been affected by the tapering of the US's quantitative easing programme on page 56 and, in a rouncltable discussion on page 64, experts discuss what the region's growth drivers will be in 2014. Colombia's highly profitable, but near-impenetrable banking se profiled on page 58, and the country's president is interviewed on page Coverage is rounded up with a ranking of the Top 100 Central American banks on page 70,
CONTENTS
NEWS, COMMENT AND SECTORS .......................................................................................................................... ......................................................................................................................... ......................................................................................................................... .........................................................................................................................
1HelIo 6The Banker Opinion
Another fine mess, but who's to blame?
Time to clarify fines; Regulators lost for words.
8
Bracken Tim Dolan and Kelly Burley
The Court of Justice ofthe EU's rejection of a UK appeal against a European shortselling ban could signal a new degree of harmonisation on financial regulation.
This month on www.thebanker.com
SPECIAL REPORT: DEBT CAPITAL MARKETS
29
The Banker's special report on debt capital markets looks at the impact of the new liquidity landscape on corporate bond market participants (page 30) while there is a government issuers roundtable on page 34.
10viewpoint Liu Mingkang
Mexico's finance minister, Luis Videgaray, talks to Silvia Pavoni, The Banker's economics editor, about the ambitious structural reforms the Mexican government has undertaken and how these will change the country's future.
The former chairman of the China Bank Regulatory Commission discusses how the authorities can manage China's current course of economic reformo
12 14
DataBank
Are eurozone banks underestimated?
News
Barclays under fire over job cuts and bonus pool increase; ICBC buys Standard Bank unit.
15
people
Luis Videgaray, Sheila Bair, Jan Bladen and Carlos Gonzalez Fillad.
18
Cover Story
42Stock Exchanges
Following a wave of consolidation and collaboration among stock exchanges, it still remains to be seen whether bigger really means better.
Jane Cooper, transaction banking editor at The Banker, asks delegates at Sibos 2013 what the industry will be talking about at this year's event in Boston.
86 Retail Banking
DATABANK
"
• US banks closing the GAAP
Bank fines have been making headlines in recent years, with huge sums handed out to some of the biggest names. The Banker assesses the situation.
With rapid economic growth predicted in Mexico, Indonesia, Nigeria and Turkey - the MINTs - retail banks in these countries are under enormous pressure to keep up.
24
90
BRIAN CAPLEN'S BLOG
Agenda
lFCS
.
Alexis de Rosnay discusses how the acquisition of Collins Stewart Hawkpoint by Canaccord Genuity gave him the chance to fulfil his ambition ofbuilding a business.
The Brazilian metropolis of São Paulo attracted the most FDI into its financial sector in Latin American and Caribbean cities in 2013.
26 Team ofthe Month
92
The challenging environment for highly rated issuers has not stopped Deutsche Bank from leading two milestone deals already in 2014.
1ssuer Strategy
28
A look at how communications infrastructure firm Arqiva extended its maturity profile in early 2014, after a major round of refinancing a year earlier.
Tech Vision
A profile of Kevin Brown, a senior executive at RBS International Banking.
94 Shaping Tomorrow
Chris Skinner explains why banks need to get back to basics.
96
Reg Rage
PSD2: playing with firewalls.
»
• How much do Basel ratios reveal about European countries? • Top 100 Russian Banks, 2014
• Kuwait governor's Islamic finance agenda • Brand lessons that banks need to learn • The danger of unleashing a currency war • The banking bonus blind spot ON WWW.THEBANKERDATABASE.COM The Top 100 central American banks ranking on page 70 was produced using The Banker Database, which provides comprehensive financial data and insight for 4000 of the world's leading banks in more than 190 countries. Our data has been normalised for regional reporting and regulatory variations, ensuring accuracy and reliability.
March 2014
I
THE BANKER
I 3
CONTENTS
COUNTRYFEATURES ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... .........................................................................................................................
WESTERN EUROPE pain
48s
There is an optimistic feeling among the CEOs of Spain's leading banks, and lenders are now looking beyond survival and towards growth.
AMERICAS
56 Latin America
The Argentinian, Chilean and Brazilian economies have all reacted differently to the tapering of the uS's quantitative easing programme.
52Germany
The new 'grand coalition' of conservatives and socialists in Germany may have a huge majority in the Bundestag, but there are already disagreements over the extent of national powers in the functioning of the eurozone banking union.
THE COLOMBIAN ECONOMY IS GOING THROUGH A GOOD
See also: Bracken, page 8, on regulatory harmonisation within the EU, and a look at Turkey's retail banks on page 86.
PRASE, WHICH MAKES IT STAND OUT AS AN ATTRACTIVE DESTINATION, NOT ONLY AT A
58
colombia
A look at the booming Colombian banking sector on page 58, followed by an interview with the country's president, Juan Manuel Santos, on page 62.
REGIONAL LEVEL BUT WORLDWIDE JuanManuelSantos, president ofColombia, page 62 ••
64 Latin America roundtable
Lower growth and a lack of reforms have slowed growth in Latin America but, as participants of this roundtable discuss, there are still some areas of promise.
CENTRAL & EASTERN EUROPE
54
Croatia
EU accession was meant to bolster Croatia's economic prospects, but it is yet to have a positive effect on the country's flagging economy. Meanwhile, its banks are facing poor asset quality and a difficult operating environment.
ASIA- PACIFIC
10
China
The former chairman of the China Bank Regulatory Commission, Liu Mingkang, discusses how the authorities can manage Chinas current course of economic reformo See also: A look at how Indonesia's retail banks are adapting to a rapidly growing economy on page 86.
4
I THE
BANKER
I
March 2014
70
Central America
This year's Top 100 ranking of central American banks. See also: The leading cities for financial services FDI in Latin American and Caribbean on page 90.
MIDDLEEAST
80
Jordan
Political instability in the Middle East has taken a toll on Jordan's economy, but those on the inside maintain that the country remains politically and economically stable, and open for business.
FOR 2014 ... THE TOP PRIORITY IS TO MAINTAIN MACRO
AFRICA
STABILITY AND TO HOLD
84Nigeria
AS TIGHT A REIN ON FISCAL
Nigeria's finance minster, Ngozi Okonjo-Iweala, is determined to ensure that the country's strong macroeconomic perfonnance of recent years and refonn agenda do not slip.
[POLICY]
AS WE CAN Ngon
Okonjo-Iweala,jinance ofNigeria, page
84 ••
minister