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Fed releases plan to curb banks' physical commodity activities

Fed releases plan to curb banks' physical commodity activities | Cultural Trendz |

WASHINGTON — The Federal Reserve Board unveiled a concept proposal Tuesday outlining how it plans to limit banks' activities in physical commodities, a day ahead of a Senate subcommittee hearing devoted to the issue.

The central bank, which is responsible for supervising the largest financial institutions in the country, is weighing whether it should extend limits that would reduce a bank's stake as well as how much institutions can trade in certain commodities.

"The board is considering whether additional restrictions would help ensure that physical commodities activities authorized for financial holding companies are conducted in a safe and sound manner and do not pose a threat of financial stability," the agency said in a press release.

On Wednesday, Michael Gibson, direction of the division of banking supervision and regulation at the Fed, will appear to speak on this issue before the Senate Banking financial institutions subcommittee, which is chaired by Sen. Sherrod Brown, D-Ohio.

Gibson will be joined by Vince McGonagle, director of the division of market oversight for the Commodity Futures Trading Commission and Norman Bay, director of the office of enforcement for the Federal Energy Regulatory Commission.

At this stage, the Fed is only soliciting comments from stakeholders before deciding how to proceed on this issue. "After reviewing the comments, the board will consider what further action, including a rulemaking, is warranted," the agency said.

The Fed is asking the public to weigh in on a variety of issues, including the risks that physical commodity activities can pose to banks' soundness, potential conflicts of interest by firms engaging in physical commodity activities and possible risks and benefits of regulators imposing additional capital requirements on those firms.

The deadline to file comments is March 15.

U.S. financial institutions have already begun trying to exit the physical commodities business given regulatory investigations and potential rule changes. In July, JPMorgan Chase & Co. announced its sale of its commodities business to potential buyers. Morgan Stanley has also reportedly been in talks to sell its commodities-trading division as well.

Brown immediately criticized the Fed's action as a "step forward" but "still overdue and insufficient."

"Each day that we wait to rein in these activities means that end users and consumers will pay higher commodity and energy prices, and taxpayers will continue to be exposed to excessive risks at 'too big to fail' banks," said Brown, who first held a hearing on the issue last July, in a press release.

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Bloomberg and Thomson Reuters act to calm bank instant messaging concerns

Bloomberg and Thomson Reuters act to calm bank instant messaging concerns | Cultural Trendz |

Financial data giants Bloomberg and Thomson Reuters have taken significant steps to calm banks’ heightened concerns around financial traders misusing instant messaging.

In a week when JP Morgan has become the latest bank to ban instant messages in multi-dealer chat rooms, chief risk and chief information officers across the industry have looked to their trading platform providers to help with the challenge.

Both Bloomberg and Thomson Reuters have now publicly addressed the centralisation of their reporting tools. This is aimed at allowing compliance officers to monitor all instant message chats among traders, and to be alerted to problem behaviours and keywords.

Bloomberg and Thomson Reuters provide the majority of desktop terminals used by traders, and Bloomberg terminals alone carry up to 20 million instant messages and 200 million e-mails every day. The changes being brought about by those companies can be seen as an effort to demonstrate that instant messaging is controllable and safe.

Instant messaging has become a major problem as traders in various banks were exposed evading standard controls, allegedly to discuss manipulating interbank Libor and currency exchange rates. Libor underpins over $350 trillion in derivatives, and $5 trillion in currencies are traded daily on the global Forex markets.

What Bloomberg has introduced

Yesterday, in response to the concerns among banks, Bloomberg announced the launch of a new Compliance Centre.

This will be a centralized repository of all of the company’s compliance tools around administration, monitoring, search and retention capabilities, in an attempt to give managers a real-time, clear view of communications.

In a blog, Bloomberg notes that its Instant Bloomberg chat service already offered these instant message monitoring tools, but they have been put together in response to compliance officers asking for “a better way to manage these communications”.

The data company said it is also stepping up its reporting capabilities and permission tools for administrators.

Thomson Reuters’ actions

Meanwhile, Thomson Reuters has recently taken its own steps. Less than a month ago, David Craig, president of the financial and risk business at the company, reminded customers that the company’s Eikon platform “has always supported” the controls that banks need over instant messaging.

He notes that Thomson Reuters’ instant messaging service Eikon Messenger only allows chat rooms to be created by managers with specific authorisation, and it comes along with a “ full compliance suite”. Using the software, compliance officers are provided with rapid alerts of messages containing questionable or risky terms.

Many of the concerns around trader conversations have focused on the anonymity of those individuals in certain online forums. Craig says that instant messaging identities on its platform are “based on names and entities of the individuals”.

Speaking frankly

Earlier this week, Bloomberg’s head of products Ben Macdonald was quoted in the Financial Times as saying that the reputation of instant messaging was in danger, and there were risks of regulators imposing tough restrictions. He added that he was “worried about regulators going down roads that aren’t good for the industry”.

But Craig at Thomson Reuters doubts that steps will be taken: “In reality, I think the chance of the financial industry moving back to just voice or e-mail communications is fairly remote.”

“Blaming the tool for the behaviour of those using it will not solve the issue,” he added.

The JP Morgan chain reaction

Whatever regulators do, the data companies and their bank customers are concerned. This week, as JP Morgan announced its ban on multi-dealer chat rooms, the company’s investment banking heads Mike Cavanagh and Daniel Pinto wrote in a memo to staff, shown to the FT: “Your e-mails, chats, and instant messages with clients or JP Morgan Chase colleagues are expected to be professional. Please refrain from using exaggerated or inappropriate language and avoid generalizations or sarcasm that could be misunderstood at a later date.”

Deutsche Bank DB -0.95% has also announced a ban, and other banks including Citigroup C -0.1%, Barclays and UBS are reportedly planning a similar move.

Mobile phones remain a danger

Financial technology experts have told Forbes that there is still a problem around instant messaging security controls. And, even if that is solved, trader mobile phones remain an area far out of the control of many banks (see here for more expert reaction).

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Why Banks Are Finally Embracing Cloud Computing

Why Banks Are Finally Embracing Cloud Computing | Cultural Trendz |

Banks are warming to cloud computing after nearly a decade of hesitation about trusting their data to outsiders.

Seventy-one percent of bank executives surveyed in a recently released report say they plan to invest more in cloud computing, nearly four times the figure a year earlier, according to PricewaterhouseCoopers. (About half of the 115 large banks surveyed around the world are based in the U.S.) One reason for this shift, according to Julien Courbe, PwC's financial services technology leader, is that vendors of public cloud services have made their offerings to banks more secure and reliable.

"This makes stakeholders more comfortable," Courbe says. "A lot of clients are starting to consider and invest in the offerings of many large technology companies to move apps and data to the public cloud. It's a significant shift. Most investments banks have made to date have been in the private cloud," in which the bank retains a greater degree of control and management. "Now we're seeing banks invest in public cloud solutions."

To improve security, cloud providers are encrypting data in storage as well as in transit. "They've also made significant investments in identity and access management," Courbe says.

In another change, midtier banks are skipping the intermediate step of private cloud implementation and going straight to the public cloud, Courbe says.

This year, Gartner forecast the public cloud services market would grow 18.5% in 2013 to total $131 billion worldwide, up from $111 billion in 2012. Infrastructure-as-a-service, including cloud computing, storage and print services, was the fastest-growing segment of the market, according to the research firm.

The major public cloud providers — Amazon (AMZN), Google (GOOG), Microsoft (MSFT) and Rackspace (RACK) — have reported strong growth in cloud use so far this year.

In April, Amazon announced that more than 2 trillion objects were stored with the Amazon S3 service and that the service was getting more than 1.1 million requests per second.

"It took us six years to grow to one trillion stored objects, and less than a year to double that number," the company said on its blog. In July, the Netherlands' banking regulator approved Amazon Web Services for use by financial organizations. All levels of data storage and management on the AWS cloud, as well as the use of technology provided by third-party vendors that runs on top of AWS, are included in the approval.

Microsoft reported in April that its Windows Azure software and related programs surpassed $1 billion in annual sales for the first time. Google says 5 million businesses use its Google Apps for Business.

"This is a movement that will continue to accelerate," Courbe says. In about 15 years, there will only be about five or six data centers in the world, he predicts.

The first use case for cloud computing in banks is application testing and development. It's a natural fit, since thorough testing of applications requires considerable computing resources but often takes just three to six months — so investing in equipment to test on doesn't make sense.

In the next phase of cloud adoption for banks, they're starting to use human resources, accounting and operations apps in public clouds. In one recent example, Standard Bank in South Africa said it was planning to move human resources applications to the cloud, as a test before putting core banking services there.


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JPMorgan analysts say big investment banks are ‘uninvestable’

JPMorgan analysts say big investment banks are ‘uninvestable’ | Cultural Trendz |

JPMorgan Chase & Co. (JPM), the largest U.S. bank by assets and the top investment bank by fees, is questioning the so-called universal bank model’s future.

Top-tier investment banks are “uninvestable at this point with a risk of spinoff from universal banks,” JPMorgan analysts led by London-based Kian Abouhossein wrote in a research note today. They cited potential rule changes and curbs on capital and funding.
Enlarge image JPMorgan Analysts Say Big Investment Banks Are ‘Uninvestable’

A company logo is displayed outside the offices of JPMorgan Chase & Co. on Victoria Embankment in London. Photographer: Simon Dawson/Bloomberg

Investors should avoid Goldman Sachs Group Inc. (GS), once the world’s most profitable securities firm, and Deutsche Bank AG (DBK), Germany’s largest bank, because of pressure on earnings and the unknown impact of new regulations, according to the report. Both firms rank among the biggest sales and trading rivals for New York-based JPMorgan, which isn’t mentioned in the report. The bank is scheduled to report first-quarter results tomorrow.

Instead, the analysts favor UBS AG (UBSN) and Credit Suisse Group AG (CSGN), Switzerland’s first and second-largest banks, and New York- based Morgan Stanley, owner of the world’s biggest brokerage, because of their restructuring potential and ability to release capital.

Investment-banking revenue will continue at 2005 and 2006 levels and will be led by fixed-income, currencies and commodities, which will account for half of the industry’s sales by 2015, JPMorgan’s analysts said.

Second-tier operators in that business, including Morgan Stanley (MS), Credit Suisse, UBS and Royal Bank of Scotland Group Plc, will have to restructure further because they lack scale, the analysts wrote. Goldman Sachs, Barclays Plc (BARC), Deutsche Bank, Citigroup Inc. (C) and Bank of America Corp. (BAC) should gain market share, according to the note.
Key Gauge

Investment-banking revenue won’t be the main driver of return on equity, a key measure of profitability, and 2015 sales are expected to remain 31 percent below the 2009 peak, the analysts wrote.

The Dodd-Frank Act in the U.S. and the Markets in Financial Instruments Directive II in Europe may lead to a drop in projected return on equity in 2015 to 9.6 percent from an estimated 15 percent, the analysts wrote. The largest impact may be on the FICC industry, according to JPMorgan.

In a worst-case scenario, if regulators were to require local funding for local operations, universal banks with leading investment banks may have to restructure and spin off their securities businesses so they can tap funding as stand-alone businesses, the analysts wrote.

“The viability of running a global Tier 1 IB business as part of a universal banking business is starting to be put in question,” the analysts wrote, referring to the investment banking business.

To contact the reporters on this story: Elisa Martinuzzi in Milan at; Liam Vaughan in London at

To contact the editor responsible for this story: Edward Evans at

Vilma Bonilla's insight:

Nice mentions of my fave investment bank players..

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Contract Training Consultants: Helping Them Join Your Team

Contract Training Consultants:  Helping Them Join Your Team | Cultural Trendz |

When rolling out a major company-wide training program, most organizations turn to contract training consultants.  Upon bringing these training consultants on board, a company expects to see positive results and achievement of specified goals.  The best results come when those contract training consultants are seamlessly integrated into the organization.  Integration is achieved when the training consultant understands and shares the organization's culture and values, when they are accepted by staff as being valuable members of the team and when they are made an integral part of the company infrastructure.

How do you accomplish this?  It takes commitment from both the organization and the trainers to make it work well.  Here are some things that your organization can do to make the relationship more successful:

    Clearly define the roles.  Before you begin searching for a contract training consultant, prepare a written description of the role you expect the trainer to play and what you expect the trainer to accomplish.  Similarly, prepare a written description of how individual members of your staff will interact with the trainer and what their specific roles are in relation to the training initiative.  This document will serve as a guide for all parties involved to ensure clarity and transparency throughout the training process.  

    Carefully select trainers before contracting.  Selecting the right contract training consultant to meet your organization's needs is crucial for success.  Review and verify their credentials to ensure their education, experience and skills are transferable to the specific goals you are trying to achieve.  Interview them to gauge whether their values are consistent with your organization's values.  Remember that successful integration into your organization depends in part on the contract trainer's commitment to making the relationship work; seek to uncover the trainer's level of commitment during this screening process.

    Understand the trainer is a learner first.  Too often trainers are thrown into the thick of things without being given the adequate information needed to execute an effective training program.  Prior to having a training consultant stand in front of a class, he/she must fully understand the organizational culture, participants learning styles and the nuances of their role.  This should all be included in the on-boarding process.

    Establish the contract training consultant as a credible member of the team.  Effective teams understand, internalize and leverage the importance of their individual roles, and that of each team member, when creating a game plan to reaching the organization's goals.  Clearly express to your staff and the contract training consultant what the trainer will be responsible for and what the staff is responsible for and your expectations for team-based performance.  When introducing the training consultant to your team, use familiar organizational terminology, such as ‘team member’ or ‘associate’ when describing the trainers’ position.

Finding a contract training consultant with the appropriate skill-set needed to properly deliver training and deliver results can be an overwhelming challenge for any organization.  If this is the case for your company, consider seeking guidance from a firm like TrainingFolks.  TrainingFolks is experienced at seeking, screening and delivering contract training consultants for organizations as they undertake large-scale change initiatives.  Our organization manages the day-to-day nuances involved in recruiting a team so that your organization can remain focused on an already overwhelming project.


Vilma Bonilla's insight:

Excellent points! It is imperative to empower consultants as business by incorporating culture, as part of the onboarding process that includes transfer of knowledge and establishing credibility..

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Why it matters who regulates Wall Street

Why it matters who regulates Wall Street | Cultural Trendz |

by Heidi Moore


Former Wall Street lawyer Timothy Massad is Obama's CFTC nominee. We'll find out whose side – Wall Street or the public – he's on soon

Today, President Obama is going to nominate a new head of a major financial regulatory agency. His job, unfortunately, will largely be to avoid making ripples and enforce new regulations that Wall Street lobbyists have written.

The president's nominee is Timothy Massad, a former Wall Street securities lawyer who joined the Treasury Department a few years back to help run the bank bailouts. He's an administration insider, and in his new position he's unlikely to be as controversial as the man he's replacing.

That man, Gary Gensler, has run what is America's smallest, and yet maybe its most important, agency to protect against future financial crises: the Commodity Futures Trading Commission, or CFTC.

The CFTC, under Gensler, has been a darling of the few remaining policymakers who listened to the complaints of Occupy Wall Street. The agency has been largely openly antagonistic towards Wall Street in the sense that it has insisted on more regulation of derivatives, the Jekyll-and-Hyde financial instruments that are as speculative as they are about reducing risk. The financial crisis showed us that derivatives, which are meant to help investors hedge against risk, are often abused as vehicles of profitable speculation. The question that is before Congress right now is: how do you allow derivatives while curbing the abuse?

Ken Griffin, the head of hedge fund Citadel, who has long worried about the dangers of derivatives, said at today's New York Times DealBook conference, "we've made progress".

The CFTC has made progress on 43 of the 60 rules it was assigned through the Dodd-Frank financial regulatory reform act – far more than any other regulatory agency. It has shot down ideas that had the potential to hurt smaller investors, like the short-lived proposal to allow people to bet on opening weekends of Hollywood movies.

Gensler, a former Wall Streeter himself, revealed in a recent speech how he did it. In essence, in a world where almost everyone Congress spoke to was a lobbyist against financial regulation, he decided to be a lobbyist for financial regulation. As he said recently:

Our tactics included giving speeches, providing Congress with legislative and technical assistance, placing opinion pieces in leading newspapers and actively working with coalitions of supporters outside of Congress.

He also made the CFTC more technologically savvy than its brethren at the Securities and Exchange Commission.

But the trend for the CFTC, as it stands right now, is not a promising one. The agency is funded with only $195m, a pittance in the context of the $700tn industry it regulates. Running on so little cash, the CFTC has had to put aside some investigations and run on a kind of life support.

There's also the fact that the success of Gensler and his former enforcement chief, David Meister, have earned Wall Street's ire and strengthened the financial industry's determination to fight them.

As a result, Gensler's team has lost some significant battles, including, notably, the one in which Citigroup lobbyists managed to write 70 out of 85 lines of a recent regulatory bill.

Big blowups of commodities firms like MF Global and Peregrine Financial, who wiped out farmers and investors as they went under, also made investors wonder if the CFTC was minding the store as well as it could. The CFTC responded by implementing new safeguards to protect customers' money – as yet untested.

But the CFTC's big upcoming challenge will be to hold its position on regulation. The big regulatory fights over the next year or two – as Wall Street continues to hammer away at Dodd-Frank – will concern the most complicated parts of the financial system. Derivatives are one part of that. Another part is the benighted, bloated Volcker Rule, which is designed to prevent banks from speculating with the money of depositors.

Wall Street, with its superior financing power and infinite patience, used to wearing Washington down by pouring coin, is going to keep these fights backstage, as befitting what Griffin called the industry's "cartel mentality". It's going to be ugly, and it's going to be quiet.

This is the situation Massad is inheriting. Gensler, an 18-year veteran of Goldman Sachs with a history of opposing derivatives regulation, came to his job with the zeal of the converted and was wise to many of Wall Street's tricks. Wall Street firms supported his nomination initially because they thought he was theirs, a made man. He became a surprising thorn in the side of the financial industry during his tenure at the CFTC.

As a result, Massad will likely be under pressure to "play nice" and create less friction than Gensler did. We'll find out during his Congressional testimony whether that is his intent. But it would be a shame if it is.

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Banks are hiring a bunch of IT experts | Reshaping Wall Street

Banks are hiring a bunch of IT experts | Reshaping Wall Street | Cultural Trendz |

LONDON (Reuters) - The investment banking industry is heading into a digital revolution that could redraw not only its business model but also the traditional image of its staff.

Stuck with dwindling profits in an era of poor returns and heavy regulation, the likes of Goldman Sachs, JP Morgan Chase and HSBC are battling to hire the best software programmers, systems engineers and data analysts, to help them get ahead via new technology and cost-cutting.

With IT expertise now a must for the boardroom, banks' conservative workplaces are likely to undergo cultural change as they welcome ambitious, differently-minded people.

"Traditionally, banks have been a lot more narrow in their (hiring) focus. Now collectively they have realized the need to be more creative," said Jeffrey Wallis, managing partner at SunGard Consulting Services, specializing in financial firms.

Adopting new technology is an evident strategy for industries in economic distress and investment banks have already spent billions to overhaul systems and cut staffing costs - 60 to 75 percent of equities now trade electronically, according to industry estimates, and that proportion is expected to continue to grow. Tighter regulation post-financial crisis has also prompted banks to overhaul their risk management systems - Goldman Sachs says it can now track and account for 6 million positions each day.

But the latest wave of technology hires has come about because banks are aiming more specifically to grow revenues by developing tailor-made products and mobile applications based on clients' trading patterns. To do that, they need to attract the top quantitative analysts and software developers - which may mean allowing some of them to work in shorts and tee-shirts from Palo Alto, California, rather than in suit and tie from a skyscraper in London's Canary Wharf.

"In the 1980s there was an influx of technology people into financial services. There was a real wave of people and a new age way of thinking came in. That injection of new talent and thinking hasn't really been coming in for a while," said David Boehmer, managing partner of the Americas' financial services division for executive search firm Heidrick & Struggles.

Spending on banking and securities IT is expected to top $471 billion this year, up 14 percent from 2010, and rise by a fifth again to hit $563 billion in 2017, Gartner estimates.

McKinsey consultants estimate banks have only cut operating costs by about eight percent since the financial crisis. Their need to overhaul IT systems has been underscored by regular evidence that those systems struggle with the complexity of modern-day trades. JP Morgan, which is close to concluding a four-year overhaul of its platforms, took a $6 billion hit last year from a scandal that was in part due to flawed valuation systems, while the May 2010 "flash crash" in U.S. stock markets took regulators five months to root out the cause.


Recent appointments suggest that outside technology specialists have gone straight to the top of the industry.

Barclays' new head of operations and technology, Shaygan Kheradpir - a former executive at telecoms firm Verizon - now sits on the bank's executive committee. Oliver Bussmann, formerly at German software firm SAP, is now UBS's new chief information officer and Greg Lavender joined Citi last year in Palo Alto as head of technology infrastructure, after senior roles at Cisco and Oracle.

Citigroup is also considering hiring a new director with technology expertise to help keep an eye on how management is doing at simplifying and standardizing the thousands of different IT systems it inherited from yearsof acquisitions. That process is expected to take at least two more years to complete, say people with knowledge of the plan, but it has the potential to add $750 million to annual profits starting in 2015 from improvements in consumer banking alone.

Goldman Sachs has added 6 percent more IT staff since 2009, while cutting elsewhere. That has left it with 8,000 technology employees, making its department bigger than many technology firms, and it works hard to lure professionals away from Silicon Valley with the message that its technology business is key.

"One of the things we strive to do is provide an awareness on campus of the activities that technologists do at the firm. It's not intuitive to think of a bank in that way," said Michael Desmarais, head of recruitment at Goldman.


As part of tempting IT expertise and graduate talent, banks are setting up in more attractive locations. Citi's IT hubs include San Francisco and Israel, JPMorgan has sites in Delaware and in Bournemouth on Britain's south coast, UBS is in Singapore and HSBC's technology centers include Curitiba in Brazil.

Britain's Barclays last week opened a new technology hub in Dallas, Texas, to recruit IT experts from non-financial backgrounds. It aims to have 700 staff there by the end of next year to build and develop software and systems such as trading platforms for fixed income, and develop digital and mobile platforms for consumer banking.

As part of the shift to more of a Silicon Valley culture, banks may also have to redraw their salary packages.

New graduates can expect to start earning around 45,000 pounds in investment banking jobs in Britain, compared to around 29,000 pounds in IT and telecoms, according to High Fliers research.

But top executives from the technology industry may be more interested in an equity stake than cash, said Boehmer - who gave executives at Davos in January a presentation entitled "Hiring an Oddball."

That's a big cultural change in an industry where job satisfaction has long been closely tied to the annual bonus.

Sungard's Wallis said if banks were on a path from zero to 100 to retool for the impact of technology, they are still only in the 20s.

"We are seeing subtle changes, but we are very much at the beginning of the leap," Boehmer said.

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2012 List of the Best Banks

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