The heroes of the SEC were able to extort $280-million from Citigroup:
The SEC alleges that Citigroup Global Markets structured and marketed a CDO called Class V Funding III and exercised significant influence over the selection of $500 million of the assets included in the CDO portfolio. Citigroup then took a proprietary short position against those mortgage-related assets from which it would profit if the assets declined in value. Citigroup did not disclose to investors its role in the asset selection process or that it took a short position against the assets it helped select.
The Basel Committee on Banking Supervision has released a Progress report on Basel III implementation. With respect to Basel III implementation, Canada reports:
Draft regulation expected in May 2012 and final guidance before the end of 2012 for implementation in Q1 2013. OSFI has issued a number of public communications concerning the implementation of Basel III.
Europe remains mired in wrangling:
German Chancellor Angela Merkel has canceled a planned speech to parliament in Berlin tomorrow because of a deadlock over proposals to leverage the European Financial Stability Facility to give it more firepower, three German lawmakers said.
“It’s a disappointing development but without any concrete proposal for increasing the efficiency of the fund the chancellor can’t present a complete set of proposals tomorrow,” Norbert Barthle the ranking member of Merkel’s Christian Democratic Union party on parliament’s budget committee, told reporters. Other lawmakers confirming cancelation of Merkel’s speech were opposition members Carsten Schneider and Priska Hinz.
“The French want more money from Germany than we are prepared to shoulder,” Otto Fricke, the budget spokesman for Merkel’s Free Democratic Party ally in parliament, told reporters today.
What’s on the table? Enormous credit lines:
Europe’s bailout fund may be authorized to provide credit lines of as much as 10 percent of a country’s economy, a draft document shows.
The enhanced fund, called the European Financial Stability Facility, may be able to offer loans to countries “before they face difficulties raising funds,” the draft guidelines obtained by Bloomberg News show. Credit lines for Spain and Italy, which required European Central Bank support, could reach 270 billion euros ($371 billion).
The guidelines prompted criticism from some German lawmakers who have opposed bailout aid as France and Germany wrangled over the role of the ECB in tackling Europe’s debt crisis. Finance ministers gather in Brussels tomorrow to set a common strategy, with leaders scheduled to meet Oct. 23.
…
France favors creating a bank out of the EFSF, boosting its financial clout with backing from the ECB, a proposal that Germany rejects, Finance Minister Wolfgang Schaeuble told lawmakers in Berlin this week. French Prime Minister Francois Fillon said today that the euro region should agree to use leverage to make the region’s financial support fund “massive.”
Monetizing the debt through the ECB would certainly be the easiest solution. Too bad it would also be the worst.
There’s a little bit more detail regarding Kweku Adoboli / UBS, but not much:
Prosecutors amended two of the four charges against Adoboli to indicate that records he allegedly falsified were on ETF trades. A London magistrates court today transferred the case against the 31-year-old to a criminal court where he will be expected to enter a plea on the accusations at a Nov. 22 hearing.
…
UBS questioned one of Adoboli’s trades in August this year, and he “provided a good and plausible explanation,” Williams said. The bank then asked him on Sept. 13 about further trades he’d made that could expose the bank to large losses, and whether he’d told the credit-risk department. He said he hadn’t.The following day, UBS asked him to confirm “the exact identities of the counterparties” on the trades and he didn’t respond, Williams said at the hearing today. Adoboli left the office at lunchtime and went to his apartment in east London, where he e-mailed the bank about the positions.
“The bank was anxious to have him explain,” and he returned at 3:45 p.m. and cooperated with UBS managers, the prosecutor said. The bank called the police late that night and Adoboli was taken to Bishopsgate precinct, the closest one to UBS’s London headquarters. He was cautioned about his rights and interviewed and “made no admissions,” Williams said.
…
In addition to the departure of Gruebel and the co-heads of global equities, Francois Gouws and Yassine Bouhara, the bank has suspended “a number of front office staff” pending further disciplinary action, Carsten Kengeter, head of the investment bank, said in a memo to staff.
Sounds like just another case of shitty management at an investment bank keeping sloppy records. Yawn.
I hadn’t realized this before but OMERS is in the mutual fund business. Many municipal employees – particularly the 75% (?) of the populace whose objective is to think about financial planning as little as possible – would be well advised to participate.
DBRS confirmed PFR.UN at STA-2:
The main constraints to the rating are the interest rate risk of the Portfolio and the potential for capital losses and reductions in income resulting from underlying securities being called for redemption by their respective issuers.
Seems to me to be a virtual certainty that one or the other of those risks will be realized.
While strong market shares in the home province remain a key strength of the Bank, the rating reflects the Bank’s regional concentration in Québec, which accounted for 68% of its revenues in 2010, up from an average of 64% over the previous four years. National’s revenue is diversified by business line: the Bank generated 48% of earnings for the first three quarters of 2011 (excluding the Other segment) from the personal and commercial banking unit, 39% of earnings from the financial markets business and 13% from its wealth management operations.
Dan Hallett writes an entertaining piece in the Globe titled BMO income fund sets yield bar unreachably high:
In his recent article, Mr. Heinzl points out that the fund’s hefty monthly cash payout – now equal to more than 9.5 per cent annualized net of fees – has been well above the fund’s longer-term returns.
…
Earlier this year, I tested the BMO Monthly Income’s distribution for sustainability. I found that since the managers would have to generate more than 17 per cent annually from its stock picks that the distribution would either need to be cut or risk further eating into the fund’s principal.
…
BMO insists the payout is sustainable, an assertion they base on the fund’s net inflows.
I love that last paragraph quoted – Madoff was saying the same thing.
When I think of all the agonizing that has gone into my estimates of sustainable income for MAPF, this kind of stuff drives me wild … but BMO can afford to hire more ex-regulators than I can, so I suppose it’s OK.
It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts winning 14bp, FixedResets up 1bp and DeemedRetractibles losing 7bp. Volatility was average, as was volume.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.9168 % | 1,999.5 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.9168 % | 3,007.2 |
| Floater | 3.60 % | 3.61 % | 155,589 | 18.27 | 2 | -0.9168 % | 2,158.9 |
| OpRet | 4.86 % | 2.59 % | 65,093 | 1.55 | 8 | 0.2881 % | 2,446.5 |
| SplitShare | 5.41 % | 0.73 % | 54,755 | 0.36 | 4 | 0.3250 % | 2,479.2 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2881 % | 2,237.1 |
| Perpetual-Premium | 5.68 % | 3.74 % | 105,131 | 0.52 | 13 | 0.0455 % | 2,127.8 |
| Perpetual-Discount | 5.35 % | 5.40 % | 110,744 | 14.80 | 17 | 0.1351 % | 2,256.1 |
| FixedReset | 5.15 % | 3.23 % | 196,233 | 2.47 | 61 | 0.0107 % | 2,328.1 |
| Deemed-Retractible | 5.08 % | 4.56 % | 210,053 | 7.64 | 46 | -0.0738 % | 2,190.9 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| SLF.PR.H | FixedReset | -2.23 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.10 Bid-YTW : 4.39 % |
| SLF.PR.B | Deemed-Retractible | -1.20 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.24 Bid-YTW : 6.35 % |
| BAM.PR.M | Perpetual-Discount | 1.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-20 Maturity Price : 21.91 Evaluated at bid price : 22.17 Bid-YTW : 5.40 % |
| FTS.PR.E | OpRet | 1.06 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-06-01 Maturity Price : 25.75 Evaluated at bid price : 26.80 Bid-YTW : 2.59 % |
| ELF.PR.F | Perpetual-Discount | 1.91 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-20 Maturity Price : 22.11 Evaluated at bid price : 22.40 Bid-YTW : 5.95 % |
| BAM.PR.J | OpRet | 2.15 % | YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2018-03-30 Maturity Price : 25.00 Evaluated at bid price : 26.15 Bid-YTW : 4.65 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TD.PR.G | FixedReset | 158,232 | Nesbitt crossed two blocks of 40,000 each, both at 26.95. TD crossed blocks of 25,000 and 50,000, both at the same price again. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 26.94 Bid-YTW : 2.97 % |
| RY.PR.E | Deemed-Retractible | 142,064 | RBC crossed 130,600 at 25.00. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 4.61 % |
| BNS.PR.Z | FixedReset | 99,030 | Recent secondary offering. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.66 Bid-YTW : 3.44 % |
| IFC.PR.A | FixedReset | 74,450 | Nesbitt crossed 50,000 at 25.05; RBC crossed 18,700 at the same price. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.01 Bid-YTW : 3.94 % |
| CM.PR.G | Perpetual-Discount | 72,112 | Desjardins crossed 44,000 at 24.85. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-20 Maturity Price : 24.53 Evaluated at bid price : 24.85 Bid-YTW : 5.44 % |
| BMO.PR.M | FixedReset | 64,840 | RBC crossed two blocks of 30,000 each, both at 26.08. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-08-25 Maturity Price : 25.00 Evaluated at bid price : 26.06 Bid-YTW : 3.07 % |
| There were 32 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| CIU.PR.A | Perpetual-Discount | Quote: 24.15 – 24.70 Spot Rate : 0.5500 Average : 0.3334 YTW SCENARIO |
| BMO.PR.K | Deemed-Retractible | Quote: 26.16 – 26.43 Spot Rate : 0.2700 Average : 0.1566 YTW SCENARIO |
| BAM.PR.X | FixedReset | Quote: 23.86 – 24.15 Spot Rate : 0.2900 Average : 0.2022 YTW SCENARIO |
| IAG.PR.F | Deemed-Retractible | Quote: 25.73 – 26.00 Spot Rate : 0.2700 Average : 0.1923 YTW SCENARIO |
| TRP.PR.A | FixedReset | Quote: 25.80 – 26.05 Spot Rate : 0.2500 Average : 0.1727 YTW SCENARIO |
| ENB.PR.A | Perpetual-Premium | Quote: 25.37 – 25.63 Spot Rate : 0.2600 Average : 0.1920 YTW SCENARIO |