Weil on Finance: Good, Bad, Ugly
Happy Friday, dear readers. Here are your morning links.
Fun with numbers at Royal Bank of Scotland
Accounting rules can be wonderful things for banks in fine messes. Royal Bank of Scotland (still majority-owned by the U.K. government five years after its bailout) today unveiled plans for a "good bank/bad bank" setup. You can see from the way RBS discusses the accompanying writedowns that the bank has been using delay-and-pray tactics for quite a while and still is. It said "faster-run down of high risk assets is expected to entail accelerated and increased impairments" this quarter of at least 4 billion pounds ($6.4 billion). So, it has known about the losses for some time but only now has decided to speed up their recognition. Plus, an additional 1 billion pounds of "impairments is expected to be incurred during the period 2014 to 2016." So even though it knows about those losses now, RBS still plans to stretch them out over another three years. Impressive. The link takes you to the RBS management report released today.
The more things change with Libor ...
Floyd Norris looks at the Libor scandal, including this week's revelations at Rabobank, and sees the bigger picture: Regulators have "set the course for allowing Libor to continue without fundamental reform." He's got a great kicker at the end. But I won't spoil it for you. Worth a read.
A warning for investors about emerging-markets assets
Gillian Tett of the Financial Times writes that the real problem for those who have poured money into emerging-markets assets is the "illusion of abundant liquidity." She notes that Mark Carney, the Bank of England governor, touched on this same point in a recent speech. "Before 2007, when the investment banking world was expanding at a breathless pace, dealers held large stocks of emerging market assets on their books. But since 2008 these inventories have shrunk more than 70 per cent, according to central bank estimates, due to the introduction of the Volcker rule in America (which restricts proprietary trading) and increases capital charges for banks to hold risky assets. This has undermined the ability of dealers to supply trading liquidity in some asset classes."
Is crowdfunding good for investors?
In most cases no, and not just because of fraud. Timothy Spangler of the New Yorker explains that "there's another problem that has gotten less attention, but is likely to be much more common: most startups fail. As a result, much of the money given to these companies ends up being lost." Professional investors who invest in startups, such as wealthy angels and venture-capital firms, know this. "They invest in many companies, with the hope that some small portion succeed." People who send money to crowdfunders "will need to bear in mind that they may be looking at opportunities that many others have passed over."
Y'all come back now, y'hear ?
Business Insider has a fun list of "15 Southern sayings that the rest of America won't understand." No. 1: "We're living in high cotton."
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