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Home » Daily Briefing » Daily briefing - 08 November 2018

Daily briefing - 08 November 2018

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Kevin Rudd's new book The PM Years

History is not fixed: it is endlessly re-written. Soon, we'll be re-writing the widely accepted story that Australian banks tiptoed through the 2008 global crisis with nary a bother. The new memoir from former Australian premier Kevin Rudd reveals that an unnamed tier one Australian bank nearly went to the wall. In recent months the reputation of Australian banks has taken a battering but which one was the worst back in 2008? "A couple of red hot contenders among the Big Four banks have jostled for this dubious honour in cautious, way-off-the-record retellings of the most depraved highlights of the crisis," writes Ian Rogers for Banking Day. "So, one of these two entities — on the accounts heard by Banking Day from diverse sources — was in more severe peril than the other major bank name on our shortlist of the hapless, with both of those in unquestionably more difficult straits at that time than either of the other two majors. At this critical time, this bank's CEO and chair were the leaders of a chorus (alongside their three major bank peers) pleading directly with Kevin Rudd and Wayne Swan for unambiguous, urgent deposit and wholesale funding guarantees." Feel free to drop any suggestions or tips to ronan.lynch@lafferty.com.

The ECB's Governing Body has voted to nominate Italian Andrea Enria as the new head of the ECB. His name will now go to the European Parliament for confirmation. "Enria, who has chaired the London-based European Banking Authority since 2011, has played a major role in shaping the European Union's new financial rulebook in the aftermath of the crisis," notes Reuters. "A former supervisor at the Bank of Italy and the ECB, he is viewed as politically neutral and ruffled some feathers at home for what was seen as an overly tough stance on unpaid bank loans and credit to small companies." Enria won out over Irish central bank deputy governor Sharon Donnery, who was seen as the architect of harsh ECB policy against the southern European nations.

BBVA continues to push on blockchain applications, and it's worth noting that early practical applications revolve around processes that are still heavily manual and paper-based, such as syndicated loans, where banks (allegedly) organise the process by sending faxes. "On Tuesday, BBVA used a private blockchain network to arrange a $150m syndicated loan for Red Electrica, the Spanish grid operator, with co-lenders MUFG of Japan and BNP Paribas of France. Legal advisers Linklaters and Herbert Smith Freehills also had access to the system which allowed all parties to exchange information instantly," writes Laura Noonan at the FT. Comically, blockchain starts to sound a lot less revolutionary when one discovers that it's basically replacing the fax machine. In April of this year, BBVA delivered the "blockchain-supported" corporate loan.

In another instance, also reported by the FT, a handful of blockchain-based trade finance systems are starting to do real business. "When Texas-based Tricon Energy wanted to buy polymers from India's Reliance Energy, the two companies avoided the usual rigmarole of phone calls, couriered documents and emails by logging on to a new blockchain system called Voltron," writes the FT. "Within minutes they had completed negotiations on the terms of the sale and then secured a letter of credit and advice from lenders ING and HSBC to complete the transaction, which was finalised on Friday." But will the system prove attractive to big shipment businesses including Maersk, which is considering its own blockchain rather than support a bank-backed blockchain? Ironically has featured recently in these pages, as the Danish shipping family threw its considerable weight behind big changes at Dankse Bank, where it owns a 21 percent stake. Voltron, which sounds like the villain of a superhero movie, is run by a bank consortium and is based on R3's Corda system.

Western Union and MPesa extend partnership

LAFFERTY BENCHMARKING

BBVA scored four stars in the 2018 Lafferty Banking 500 report. Danske Bank scored three stars. The maximum score is five stars.

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