It will come back into fashion if you just wait long enough...

I was only of the lucky millions to be sent the press release from the Irish Minister for Finance announcing radical new plans to restructure the regulatory environment in Ireland.

The Minister announced...

the Government’s agreement to the establishment of a single fully integrated
regulatory institution, the Central Bank of Ireland Commission. This new
structure will replace the current board structure of the Central Bank and the
Financial Services Regulatory Authority to achieve the highest performance
standards for the new organisation.

Emmmmm - I'm a bit confused here. Doesn't that sound just like what we came from a few years ago when we had the one Central Bank. I must be missing something.

It turns out I am because according to our great leader....

The consumer information and education role, currently carried out within the
Consumer Directorate in the Financial Regulator will be re-assigned to the
National Consumer Agency (NCA). The NCA is being amalgamated with the
Competition Authority.

So let me get this straight - we are re-forming the old Central Bank minus the consumer protection part (the one area that probably worked well in the "old" Central Bank). That's going to highly effective NCA which in turn is merging into the Competition Authority - which of course has a long history of successfully battling duopolies, monopolies, price rigging and general anti-consumer activities. Gotcha.

So who will be getting any work done?

The reforms will be supported by a significant expansion of regulatory
capacity within the new structure. Substantial additional staff with the skills,
experience and market-based expertise needed to meet the objectives of the new
structures will be appointed. Those recruited will also have the expertise to
regulate the international financial services sector.

OK - well I guess there are enough idle hands wandering the streets with 6 months work experience in Citco. But generally speaking they are "Carbon Blobs from Sector 7 G" (to quote a certain cartoon character). Not sure I would put them in the bracket of having the expertise to regulate the financial services sector. And what's this "Significant expansion of regulatory capacity" - I hope they aren't referring to new regulations when the novel idea of enforcing the current ones has yet to be considered.

So you might be worried that managing the whole change thing is going to make for a total train crash. But the Minister is a step ahead of you. He's thought of everything....

The Minister is determined these changes are progressed quickly. Accordingly,
he has established a high level group, chaired by his Department and including
representatives of the Central Bank and Financial Regulator, to expedite the
implementation of the Government’s decision and undertake appropriate
consultations.

I feel comforted already. And just in case you weren't feeling warm and fuzzy about the whole process already, there's more...

the current Governor of the Central Bank, John Hurley, was requested to
continue in office, past the completion of his term in March 2009, for a short
period to ensure continuity and leadership during the disruption in financial
markets. The Governor has agreed to remain for a period of additional months to
facilitate the smooth transition to the new arrangements.

Which is just the icing on the cake.

So if I have this right.... we are going to take the two current regulatory bodies, which we just spent years trying to set up, and revert back to the old Central Bank except for the one part that seemed to be working as it should. We're going to stick that working part into an organisation that is doing little visibly to protect consumers. With the rest of the regulator we are going to add a load of new people off the street and try to stick the parts together and manage it by a committee of overpaid "nine to fivers" who were running it badly in the first place and the whole thing is going to be run by the guy who was in charge as the banks run roughshod over the country.

HSE mark II anyone? Nah - worse than that.

It seems HSBC aren't alone....

Well HSBC must be happy that they are not the only ones being sued in relation to appointing Madoff as a sub-custodian.

Though I reckon suing Fortis could be more lucrative given they are effectively Dutch civil servants now. Though the inclusion of Fortis NY does drag in Fortis Belgium - and hence BNP (the new owners).

This could get interesting...

Just a little old company entertaining friends

It seems the Fed and the US banking regulators are starting to investigate some of the corporate gifts doing the rounds....

I particularly liked the one where the guy accepted a $10,000 wedding present for his daughter. And there I was last Christmas making sure the one bottle of wine we received into the office was raffled off among the staff - ha. Even better was the quote...

"This was just a little old company entertaining some friends"

Now this would be an interesting avenue to go down in the cosy world of Dublin finance. There is more than a whiff of a few "little old companies" who entertained their friends in Dublin over the last few years.

What's up with HSBC

Something funny is going on at HSBC in terms of their alternative business and it's all happening behind the scenes.

It has been leaked out that HSBC is going to stop its Fund of Hedge Fund credit facility service. This was one of their key advantages in the Fund of Hedge Fund space. In fact this blogger knows of a number of clients who remained with HSBC only because of this facility. So are they going to show the door to some of their clients.

This follows other recent rumours. The most interesting one which has crossed the desk of this blog is that HSBC have made the decision to close a number of offices including Isle of Man, Jersey and Bermuda.... Just think about this one for a second. HSBC Alternatives which is effectively the ex Bank of Bermuda business is rumoured to be closing the Bermuda office.

All of this, of course follows HSBC's discovery that by appointing Madoff as a sub-custodian they could leave themselves open to litigation. This blog understands that this case has led to a complete review of sub-custody and 3rd party arrangements within HSBC ALternatives - perhaps not a surprise. Again, this blog is aware of a number of mandates that HSBC has indicated it is resigning from because of sub-custodians.

So here we have HSBC Alternatives - backing out of Fund of Funds, resigning from anything that involves sub-custody, currently being sued for mutiple billions in relation to Madoff and alledgedly closing three of its offshore centres including the old head office.

With this in mind, when I was having a chat over coffee with a senior HSBC person over the weekend, I wasn't as shocked as I might have been when they let it slip that HSBC are seriously considering getting out of alternatives. Or at least to only service those clients who are mainly regular mutual fund clients with alternative arms. Whether the decision is final yet I don't know.

But no announcement. I assume the rush to the door is a big worry. Taking Ireland alone, HSBC have the guts of 1,000 people here the vast majority of whom are in alternatives. But interestingly, quite apart from the recent move out of their old city offices, HSBC just finished emptying their European training centre in Sandyford - a facility they had pumped significant amounts of money into over the last 5 years and where up to recently a large number of staff were based.

Is HSBC preparing the path to close down their Alternatives business. What will the implications be in Dublin.

Interesting times....

Ever have one of those days....

You just know that feeling....

Maybe the Latvians have found the solution to the World's problems - I look forward to the Dublin version next year

Under Cover of Darkness....

It's interesting times in our industry...

In the last quarter of 2008 and the first half of 2009, most of the big players in administration have been shedding jobs, cutting pay and reducing hours. From what we hear, 10% job cuts and a similar number in staffing cuts seem to be fairly normal. And the rationale makes perfect sense - the value of assets under administration have been tumbling with a resultant drop in fee revenue. Perfectly logical...

Except it's not. While a number of funds have announced they are closing up (and even then a fund closing needs just as much, if not more, attention than a "live" one) in reality the amount of work which is required hasn't dropped much. So this means either (a) the level of service is being dropped significantly by the major houses, (b) they are requiring staff to fill in the gaps or (c) they were running a sloppy operation to begin with. Hiring all sorts of people while times were good and never tackling fundamental probelms. Who needs to worry about things when business is walking in the door.

What has been happening in the IFSC for years is HR management by revenue budget - if I can grow my income by €100k I can hire another person. And now that times are tougher, the senior management are hidden in the staionery cupboard counting the pens... rumour has it that at least one big operation has a "procedure" for obtaining pens !!!

So now the very "management talent" who didn't know how to build a viable business in the first place are taking their revenge and have the perfect cover - the global economy is forcing our hand. It's the old carnival trick of having the punter look one way while they pocket playing card.

Normally I wouldn't be bothered because this is just an opportunity for those operations that are properly managed to build their business. But these are the guys who are trying to develop the strategy for the IFIA to get us out of this mess. Except none of them have ever managed through the tough times.

Maybe we should be calling back some of the old timers who setup the IFSC and built it up during the really hard times. They can take over.... under the cover of darkness

Starting Up

The first blog....

The aim should be, I suppose, to impart some wisdom, spread some rumour, report some scandal or something like that. I'm afraid that's not going to happen today. I'm really just getting this started and with no real purpose in mind other than as an alternative to a diary.

The aim is to post periodically - every now and again about the industry I work in (and that's where the rumours will come with a bit of luck) but also just to point to some of the other stuff that is out there... it's easy to let your brain atrophy in this business - God knows it's not rocket science. And maybe every now and again a comment on where we are going both in this business and in Ireland.

I don't expect this will ever have too may readers - I'm not expecting to get rich from AdSense click throughs - Ha !!! - but if anyone is out there at any stage, feel free to post and leave comments. However, talking to myself in the wilderness is just useful too.

Anyway - the cherry is popped, first post is up and from now on, comments will be about the world out there, not about me and what I'm doing.

MadMin