We announced a share placing last week and I’d like to thank the institutions who came in. It is good to have Herald Investment Trust as one of our shareholders alongside Legal & General Investment Management who increased their shareholding. We gained some other excellent names as our shareholders, but it’s not appropriate for me to name them as they are below the 3% level.
The events in Spain this week-end show that the Eurozone crisis is still very far from over. I thank my lucky stars for the UK and for the rest of the EU that Tony Blair was stopped from taking Britain into the Euro. If Spain and Greece are so serious for the Euro, the UK in the Euro would have been a complete catastrophe – even Germany could never have written big enough cheques. As it is the UK can continue to borrow mainly in its own currency, and enjoy a high credit rating.
I must say the world economic background does not look great. Owing to overspending in some cases or rescuing banks in others, Western Governments are running up increasingly large debts which will become unsustainable if growth rates continue to be low. It looks to me more and more as if the only way to get out of this mess will be to devalue the huge government debts run up in Europe and America. This can be achieved by Sovereign Default or, much more likely, by printing even more money and letting inflation return allowing wealth to be transferred from creditors to debtors. It is in any case particularly vital for Europe that there is more inflation in Northern European Eurozone countries than in Southern Europe otherwise the economic imbalances causing the current mess will not correct themselves for a generation. Meanwhile policymakers are stuck between the completely contradictory goals of wanting banks to lend more to encourage more economic growth and tax revenues and on the other hand wanting them to be safer, i.e. lend less.
We as a company have never been busier. What I see when I get to my desk in the morning is, yet again, so completely at variance with what I read in the newspapers. We are very busy with the European Banking Authority’s COREP and other regulatory change such as EMIR and Dodd-Frank. Banks are spending money on regulation and on controlling risk, and much of that regulatory spend is mandatory. In an uncertain world, we have a real opportunity to break through, and owing to the dynamics of our business a good part of revenue growth goes to the bottom line.
I am again at the FIA conference which is attended by many very senior people from the futures and now OTC derivatives industry, so an excellent place to catch up with a lot of people in three days. It is astonishing how much post-crisis regulatory driven change there has been in the derivatives market, and how big the impact is for the top firms. Some of the reform has, frankly, been costly and ineffective in reducing risk. Some of that driven by the Dodd-Frank Act is very useful to the growth of the market, for example the greater transparency that is created by the need to report swap trades.
Lombard is already the market leader for bank regulatory reporting in the UK and (by far) for foreign bank regulatory reporting in the U.S., but the regulatory reform from Dodd-Frank and similar reforms coming in Europe with EMIR or MIFID 2 and in other countries like Japan and Hong Kong that have mandated trade repositories and transaction reporting is very important not only for the market but for Lombard Risk as a firm. We are not in the market to compete with firms like DTCC which have industry standard trade repositories, but we can greatly help individual firms with their own in house repositories of trades and events which can be used as an engine to report to whichever regulator needs the data. It is a natural evolution of how we can help our regulatory reporting clients.
Interestingly we are finding that quite a number of firms are inadequately prepared for Dodd-Frank even though there are only a few months to go until the first deadline. We are there to help them as well as work with new clients, and we are keen to work with partners on it to do some of the integration work required.
If you would like to find out more about Finrep and how it might affect you. You might also be interested in looking into Risk Management Solutions for all other related information you can visit the site www.lombardrisk.com
This article is copyright free.