{"id":9498,"date":"2010-01-22T21:56:47","date_gmt":"2010-01-23T01:56:47","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=9498"},"modified":"2010-01-22T21:56:47","modified_gmt":"2010-01-23T01:56:47","slug":"january-22-2010","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=9498","title":{"rendered":"January 22, 2010"},"content":{"rendered":"

The bank regulators have spent the past few years decrying regulatory arbitrage – the idea that differing jurisdictions can have different rules. Looks like regulatory arbitrage will increase<\/a>:<\/p>\n

Prime Minister Gordon Brown distanced his government from proposals by President Barack Obama to split up banks, saying nations require solutions tailored to their own needs.<\/p>\n

Brown\u2019s plan to force banks to detail how they\u2019d unwind in case of their demise is strong enough to protect the U.K., spokesman Simon Lewis told reporters today in London. In contrast, the opposition Conservative Party, said it wanted \u201cObama-style regulation\u201d to prevent future banking crises.
…<\/b>
Brown\u2019s response underscores the failure of leaders to develop a coordinated approach to global banking regulations and opens a battle line with the Conservatives before an election that must be held by June. Opposition leader David Cameron praised the bid to keep banks from the \u201ccasino operations of proprietary trading.\u201d<\/p>\n

The Financial Services Authority, the U.K.\u2019s banking regulator, called the U.S. plans \u201cinteresting.\u201d FSA Chairman Adair Turner, who heads a committee examining the issue for the Financial Stability Board, which guides policy for the Group of 20 Nations, opposes a legal split of deposit-taking and trading units, and argues that capital charges on bank trading books help curb excessive risk.<\/p><\/blockquote>\n

Mind you, nobody knows the definition of proprietary trading<\/a>:<\/p>\n

Other analysts pointed to uncertainty surrounding the detail of Obama\u2019s plan. \u201cWe are in the dark as to how proprietary trading activities can be effectively distinguished from Treasury activities and the risk-assumption inherent to market making,\u201d analysts at Keefe, Bruyette and Woods Ltd. said in a note today.<\/p><\/blockquote>\n

Since prop trading will be allowed if it done to serve customers, and since a counterparty to a trade necessarily has a trading account with the bank and since somebody with an account is by definition a customer … a broad interpretation will have no effect whatsoever!<\/p>\n

The Bank of Canada has published a working paper by Teodora Paligorova titled Corporate Risk Taking and Ownership Structure<\/a>:<\/p>\n

This paper investigates the determinants of corporate risk taking. Shareholders with substantial equity ownership in a single company may advocate conservative investment policies due to greater exposure to firm risk. Using a large cross-country sample, I find a positive relationship between corporate risk taking and equity ownership of the largest shareholder. This result is entirely driven by investors holding the largest equity stakes in more than one company. Family shareholders avoid corporate risk taking as their ownership increases unlike mutual funds, banks, financial and industrial companies. Stronger legal protection of shareholder rights is associated with more risk taking, while stronger legal protection of creditor rights reduces risk taking.<\/p><\/blockquote>\n

Hmm …. so the Bank Act, with its restrictions on control, serves to increase the propensity for risk taking by banks …. hmmmm …<\/p>\n

Econbrowser<\/i>‘s James Hamilton takes a look at inflation fears<\/a> and concludes that we don’t need to worry … yet:<\/p>\n

<\/a>
Click for big<\/i><\/div>\n

Inflation is not something you should be afraid of for 2010. But what we need is a convincing commitment from the government to both near-term stimulus and longer-term fiscal responsibility in order to be assured that it’s not a concern over the next decade.<\/p>\n

And that’s not what I’m seeing from the U.S. Congress.<\/p><\/blockquote>\n

POW.PR.C continued to trade well in excess of its normal volume but the peak of the idiocy<\/a> appears to have passed. Moody’s massive downgrade of BMO Prefs<\/a> did not have any immediate effect on their price.<\/p>\n

Volume declined a little but remained elevated, as PerpetualDiscounts gained 6bp and FixedResets lost 5bp.<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n
HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices<\/strong>
Values are provisional and are finalized monthly<\/td>\n<\/tr>\n
Index<\/td>\nMean
Current
Yield
(at bid)<\/td>\n		Median
YTW<\/td>\n		Median
Average
Trading
Value<\/td>\n		Median
Mod Dur
(YTW)<\/td>\n		Issues<\/td>\nDay’s Perf.<\/td>\nIndex Value<\/td>\n<\/tr>\n
Ratchet<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n0.0000 %<\/td>\n1,707.7<\/td>\n<\/tr>\n
FixedFloater<\/td>\n5.72 %<\/td>\n3.80 %<\/td>\n34,280<\/td>\n19.27<\/td>\n1<\/td>\n-1.0417 %<\/td>\n2,762.3<\/td>\n<\/tr>\n
Floater<\/td>\n2.30 %<\/td>\n2.64 %<\/td>\n108,394<\/td>\n20.66<\/td>\n3<\/td>\n0.0000 %<\/td>\n2,133.5<\/td>\n<\/tr>\n
OpRet<\/td>\n4.85 %<\/td>\n-7.18 %<\/td>\n112,247<\/td>\n0.09<\/td>\n13<\/td>\n0.2872 %<\/td>\n2,318.8<\/td>\n<\/tr>\n
SplitShare<\/td>\n6.38 %<\/td>\n-1.05 %<\/td>\n171,103<\/td>\n0.08<\/td>\n2<\/td>\n-0.3289 %<\/td>\n2,106.0<\/td>\n<\/tr>\n
Interest-Bearing<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n0.2872 %<\/td>\n2,120.3<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n5.82 %<\/td>\n5.84 %<\/td>\n152,264<\/td>\n13.85<\/td>\n12<\/td>\n0.0309 %<\/td>\n1,886.1<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n5.76 %<\/td>\n5.80 %<\/td>\n181,718<\/td>\n14.19<\/td>\n63<\/td>\n0.0556 %<\/td>\n1,825.5<\/td>\n<\/tr>\n
FixedReset<\/td>\n5.42 %<\/td>\n3.60 %<\/td>\n347,519<\/td>\n3.83<\/td>\n42<\/td>\n-0.0542 %<\/td>\n2,180.0<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n\n
Performance Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nChange<\/td>\nNotes<\/td>\n<\/tr>\n
NA.PR.L<\/td>\nPerpetual-Discount<\/td>\n-1.04 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-01-22
\nMaturity Price : 21.54
\nEvaluated at bid price : 21.83
\nBid-YTW : 5.55 %<\/td>\n<\/tr>\n
BAM.PR.G<\/td>\nFixedFloater<\/td>\n-1.04 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-01-22
\nMaturity Price : 25.00
\nEvaluated at bid price : 19.00
\nBid-YTW : 3.80 %<\/td>\n<\/tr>\n
CM.PR.K<\/td>\nFixedReset<\/td>\n-1.00 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-08-30
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.65
\nBid-YTW : 3.74 %<\/td>\n<\/tr>\n
RY.PR.H<\/td>\nPerpetual-Premium<\/td>\n1.01 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2017-06-23
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.00
\nBid-YTW : 5.61 %<\/td>\n<\/tr>\n
ENB.PR.A<\/td>\nPerpetual-Premium<\/td>\n1.05 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-01-22
\nMaturity Price : 24.85
\nEvaluated at bid price : 25.06
\nBid-YTW : 5.57 %<\/td>\n<\/tr>\n
BAM.PR.J<\/td>\nOpRet<\/td>\n1.79 %<\/td>\nYTW SCENARIO
\nMaturity Type : Soft Maturity
\nMaturity Date\t: 2018-03-30
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.11
\nBid-YTW : 4.82 %<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n\n\n
Volume Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nShares
Traded<\/td>\n		Notes<\/td>\n<\/tr>\n
BNS.PR.X<\/td>\nFixedReset<\/td>\n177,025<\/td>\nRBC crossed 11,000 at 27.75; Desjardins crossed two blocks of 80,000 each, both at 27.80.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-05-25
\nMaturity Price : 25.00
\nEvaluated at bid price : 27.70
\nBid-YTW : 3.58 %<\/td>\n<\/tr>\n
TD.PR.M<\/td>\nOpRet<\/td>\n120,100<\/td>\nRBC crossed blocks of 48,800 and 61,200, both at 26.16.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2010-02-21
\nMaturity Price : 26.00
\nEvaluated at bid price : 26.25
\nBid-YTW : -8.46 %<\/td>\n<\/tr>\n
TD.PR.G<\/td>\nFixedReset<\/td>\n107,080<\/td>\nNesbitt crossed 100,000 at 27.85.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-05-30
\nMaturity Price : 25.00
\nEvaluated at bid price : 27.82
\nBid-YTW : 3.46 %<\/td>\n<\/tr>\n
RY.PR.T<\/td>\nFixedReset<\/td>\n42,370<\/td>\nRBC crossed 15,000 at 27.62.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-09-23
\nMaturity Price : 25.00
\nEvaluated at bid price : 27.70
\nBid-YTW : 3.63 %<\/td>\n<\/tr>\n
TRP.PR.A<\/td>\nFixedReset<\/td>\n39,470<\/td>\nTD crossed 10,400 at 26.00.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2015-01-30
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.96
\nBid-YTW : 3.82 %<\/td>\n<\/tr>\n
BAM.PR.R<\/td>\nFixedReset<\/td>\n36,400<\/td>\nRecent new issue<\/a>.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-01-22
\nMaturity Price : 23.25
\nEvaluated at bid price : 25.52
\nBid-YTW : 4.77 %<\/td>\n<\/tr>\n
There were 40 other index-included issues trading in excess of 10,000 shares.<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

The bank regulators have spent the past few years decrying regulatory arbitrage – the idea that differing jurisdictions can have different rules. Looks like regulatory arbitrage will increase: Prime Minister Gordon Brown distanced his government …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[],"class_list":["post-9498","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/9498","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=9498"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/9498\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=9498"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=9498"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=9498"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}