Bank of England raises alarm over surge in high-risk lending

Link: https://www.theguardian.com/business/2018/oct/17/bank-of-england-high-risk-lending-leveraged-loans

Date: 17th October, 2018

Media: The Guardian

• What happened?

The Bank of England has issued a stark warning over the rapid growth in lending to indebted companies around the world, drawing parallels with the US sub-prime mortgage market that triggered the 2008 financial crisis. Gross issuance of leveraged loans by UK companies reached a record £38bn in 2017.

That is, they are making packages with the leveraged loans and the banks sell them to third-party investors, for this, the FPC (financial policy committee) said, adding that it would assess the risks to British banks in the 2018 banking industry stress tests.

• Whom and where it affects?

This situation affects the Bank of England and as a consequence, also the financial market.

• What sort of public or private institutions are involved?

The public institutions are the Bank of England

As private institution,  Reserva Federal de EE.UU .

• Why is it important for Banking and Finance?

Because there are growing concerns that companies will be unable to repay their debts as central banks begin to raise interest rates 10 years on from the crash, including three hikes this year by the US Federal Reserve; and this triggers a crisis.

• What do you think will be the consequences in the foreseeable future?

If the right measures are not taken now on the previous situation, it could trigger another systemic crisis, as happened with sub-prime mortgages.

• Key words: leveraged loans, sub-prime mortgages, stress test, financial crisis.

Europe should be wary of stealing London's financial sector

"Excessively large financial sectors damage productivity and growth."

Link: Europe should be wary of stealing London's financial sector

Date: 18th October 2018

Media: The Guardian

• What happened?

Due to the negotiations about the Brexit in United Kingdom, other European countries are using the deep uncertainty about the future financial regulation of the continent’s financial markets to include business and activities.

• Whom and where it affects?

This issue afects the rest of the business and countries in the European Union.

• What sort of public or private institutions are involved?

It involves all institutions, mainly financial and bank sector, the Brexit pretends a financial rethinking about a major financial centre is, of course, unambiguously good for Porsche dealerships, upmarket champagne bars and table dancing clubs.

• Why is it important for Banking and Finance?

Is very important because the relationship between the rest of Europe banks and United Kingdom banks. This banks had lost the capitalization also the interest rates are at historic minimums, apart of the financial crisis because of the brexit, the GDP also suffers a contraction. There was a drop in housing prices, specifically 33%. In addition to all, United Kingdom has  a void on the part of the rest of countries of the European Union, costing them thus to obtain financing outside of UK. 

• What do you think will be the consequences in the foreseeable future?   

The United Kingdom will participate in a real-world experiment that tests the economy. It will produce the substancial relocation of financial activity unless it realice a major advance in the Brexit negotiations. If it happen , the BIS economists won't make a mistake. 

Key words: Brexit, capitalization, GDP, EU, UK, uncertainty, bank, financial, interest.

Barclays And Deutsche Bank: A Tale Of Two Investment Banks

Link: https://www.forbes.com/sites/francescoppola/2018/10/24/a-tale-of-two-investment-banks/#70a819b15f6a

Date: Oct 24th, 2018

Media: Forbes

What happened?

Barclays and Deutsche Bank are leading European banks by total assets (in billion €) and they have released their third-quarter results.

Although at first glance, these results look good, as their profits increased, poor performance in their investment banking divisions is bad news for both banks.

Whom and where it affects?

It affects both banks in Europe, and therefore, their investors, shareholders or clients.

What sort of public or private institutions are involved?

Barclays is a British multinational investment bank and financial services company headquartered in London; and Deutsche Bank is a German investment bank and financial services company headquartered in Frankfurt, Germany.

Why is it important for Banking and Finance?

As these banks are the most important banks of Europe, their bankruptcy or their financial problems, can cause a financial instability in the European economy or even systemic risk.

What do you think will be the consequences in the foreseeable future?

There is a possibility that Deutsche Bank merges with Commerzbank (also German bank). Bolting the two “ailing German giants” together might perhaps create a bank large enough to compete with the Americans, though it’s a risky strategy - mergers of this kind can have the unfortunate effect of amplifying the weaknesses of both banks. In case this happened, Barclays could suffer too much pressure and it wouldn't resist to compete succesfully once again with the American giants.

Key words:

Investment bank, Shareholders, Investors, Europe, Deutsche Bank, Barclays, Results/performance.

Banks to check account names to beat transfer fraud

Link: https://www.theguardian.com/money/2018/oct/18/banks-to-check-account-names-to-beat-transfer

Date: October 29th, 2018

Media: THE GUARDIAN

What happened?

In recent years, as a result of fraud in the UK payment industry, criminals have developed increasingly sophisticated tactics to steal money. Criminals have been hacking the email accounts of builders, lawyers or other merchants, to send large amounts of money to criminal accounts. Starting next year, the so-called "beneficiary confirmation" system will mean that clients can verify that they are paying the right person.

Whom and where it affects?

Due to this scam network, there are many banks and users that have been affected by these frauds. In short, banking customers in the United Kingdom.

What sort of public or private institutions are involved?

There are several institutions involved in this wave of fraud.

These institutions were not directly affected by these frauds, but they did participate in them.
For example Barclays, a financial services company, which operated on the same account as the scammer used to accept your money. Barclays says he does not inform the police of such crimes, because "the bank is not the victim."

Another case is HSBC Bank, which was recently splashed, Falciani hacked the accounts of thousands of customers and delivered the information to the French authorities.

Why is it important for Banking and Finance?

In order to detect the growing wave of fraud in bank transfers. Because they withdraw large amounts of money, and currently the measure for these types of transfers or withdrawals are not safe.

What do you think will be the consequences in the foreseeable future?

That the frauds will be reduced, but perhaps the process would be slower, since it is necessary to confirm a great variety of documentation corresponding to the person who is doing the transfer.

Key words: Bank security, Electronic accounts, Bank transfers, Fraudulent payments, Payment confirmation, Scams