The European Sovereign debt crisis , which engulfed the EU after the Financial Crisis, left an indelible mark on the structure and mentality of those charged with leading the bloc. Now, as the bloc faces yet another crisis in the form of the COVID-19 pandemic, it appears that the leaders of the EU and, in particular the ECB (European Central Bank), have learned their lessons from 2012 and are taking proactive actions against the coming wave of downgrades. However, have they really learned their lesson? Also, what are the risks that the EU is opening itself up to, financially, as well as politically? In this post we will review the unscheduled announcement recently by the ECB that it will now be accepting the bonds of so-called ‘fallen angels’ as collateral . It is being widely reported in today’s business press that the ECB will, as long as a so-called ‘fallen angel’ was deemed investment-grade on and before the 7 th April and that they remain as BB-rated (or the equivalent), a...

In this post, we will examine the calls made today by a US Senator in relation to the leading technology companies. We covered the issue of oligopolies and market dominance in a recent post , and the issues are the same within the technology sector. However, a legislative approach that was taken in the 1930s is being cited as a good approach to take now, which is line with the common mantra in the modern day where everything was better and more effectual ‘in the past’. In this post we will take a step back to examine whether that past approach really was effectual, and discuss whether it really is applicable to the modern marketplace. David Cicilline, a Democratic Head of the House antitrust subcommittee in the US, said today that imposing a system akin to the Glass-Steagall Act upon the technology industry would potentially serve to restrain the size of the largest technology companies and bring them in line with a more consumer-based purpose. Speaking to the Financial Times ,...

In today’s post, we will look at something which we have covered a number of times here in Financial Regulation Matters , and that is the personal debt arena which continues to increase. After official figures were released recently, we can continue to chart this dangerous phenomena. However, we will examine this issue in relation to a number of connected issues, like consumer spending, to examine what is, in effect, a massively systemic cycle . It was reported recently that, in November alone, more than £400 million was added to the total personal debt owed in the UK alone, which now stands at £72.5 billion . In the UK, the average household debt now stands at £15,385 and this figure is in relation to a number of sources of credit including credit cards, banks, and the auto-sector. In the US, the total household debt stood at just over $13 trillion as of August last year, whilst Chinese debt is continuing to rise. Although we are talking about personal debt in this post, it...

In Financial Regulation Matters , we have looked at a number of issues within the automobile (hereafter ‘auto’) industry, ranging from the positive – the ever-growing expansion of the electric auto market – to the negative – concerns over the finance bubble which is continuing to grow within the sector . Today’s post looks at the latter issue, with news recently suggesting that the inevitable conclusion to the growing ‘bubble’ is drawing ever nearer. In a post in May of last year, we discussed how the fears regarding a growing credit bubble in the auto industry were beginning to get louder and louder, with the Financial Conduct Authority and the Bank of England raising specific concerns over an increased rate of indebtedness within the sector . Now, in the United States, those same concerns have manifested in the first stages of a process we are all living the result of today. Only a few days ago Bloomberg reported that a ‘ growing number of small subprime auto lenders are clos...

We have looked at the Auto Industry on a few occasions here in Financial Regulation Matters , with posts ranging from industry reorganisation with Peugeot’s purchase of Opel-Vauxhall , the increasing securitisation of auto finance packages , to corruption within the industry . Today, we will review the latest demonstration of an ever-tightening marketplace by looking at the news that Geely Automotive, a significant player in the Chinese electric vehicle market , has recently invested $9 billion for a 9.7%, and largest stake in German automotive powerhouse Daimler . There have been some concerns raised as to the potential effects of the deal, so whilst we shall be focusing upon those, we will also look at the sentiment that this news provides for the direction of the automotive industry. Geely’s purchase of the Daimler shares, making it the largest shareholder, comes on the back of a concerted wave of action by Chinese automotive companies outside of Chinese markets. Geely is the...

In today’s post, we will be previewing an article produced by this author that was very recently published in the Journal of Sustainable Finance & Investment (available here ). The article is concerned with recent developments within the ‘Principles of Responsible Investment’ (PRI) initiative that is being undertaken by the U.N., with the focus being on the proposed incorporation of the leading credit rating agencies (for the most part) and their products. The emphasis of the article is on explaining the view that, based on the historical development of the credit rating industry, inducting them into the potentially systemic-altering movement carries with it great risk, and it is that risk that is analysed within the article. The article begins by not explaining the developments within the PRI, but by examining a concept known as ‘rating addiction’. Using the literature to provide context for the concept, an assessment is undertaken to examine how the leading rating agencies...

In today’s post we will be looking at some stinging criticism that was aimed at the Financial Conduct Authority recently, specifically in relation to its regulation of Packaged Retail and Insurance-Based Investment Products, or PRIIPs. In assessing the context behind the criticism, there exists an opportunity to examine the focus of the FCA in relation to its stated mandate of aiming to ‘ make financial markets work well do that consumers get a fair deal ’. A PRIIP is essentially a packaged investment product, and it is a common investment product provided by banks within the E.U. as it offers retail investors an alternative to traditional savings accounts ; however, the determination of what constitutes a PRIIP has been intentionally left broad to allow for a range of products to be traded, but for our purposes it is enough to say that the products are publicly marketed, have exposure to underlying assets like stocks and bonds etc., provide a return over time, and have an eleme...

In November we discussed the impending crisis at Carillion, the large-scale construction business that has become intertwined with the U.K.’s economic future, by way of projects like HS2 – the large scale infrastructure project that is designed to herald a new era for the different parts of the U.K. by linking them together by high-speed rail networks. In this post, we will get an update on proceedings in this particular case because, as predicted, the situation is worsening by the day and the realisation that Carillion could collapse moves closer and closer as each stage of the rescue-process fails. Whilst the same points will be repeated i.e. the danger of such a collapse for an intertwined company, a new emphasis will be placed upon a potential ‘bail-out culture’ that may emerge as the U.K. heads into unchartered and particularly choppy waters post-Brexit. At the moment, almost 200 creditors are engaged in negotiations regarding Carillion’s future , with analysts suggesting t...

Here in Financial Regulation Matters we have looked at the issue of personal debt before, with posts ranging from the ever-growing crisis to the predatory lending that exists within the sector. In today’s post, we will be looking at the figures that have been released by a blog for Bank of England (BoE) staff – it is not a usual blog, but a vehicle for BoE staff to openly discuss certain policies and aspects that affect policies – that describe how the situation for everyday consumers is a cyclical, almost hopeless process that many stay trapped in for decades. This analysis will be counteracted by the news stories that receive plenty of attention in the media, with the aim being to illustrate how consumer confidence is almost enshrined within the modus operandi of the system , even in the face of opposing, and often devastating facts. The news has been awash recently with stories about consumers operating more shrewdly in the credit markets (in relation to switching between...

In the first of a number of posts today, this post looks at some of the noises emanating from the financial elite within the U.K., particularly with regards to Brexit. It should come as no surprise that the decision to leave the E.U. has caused anxiety amongst business leaders within the City, and recent political developments have not made a positive impact in that regard. So, in this post, we shall look at some of the concerns that are being raised, and the impact that certain developments may have upon the City, and also the British society moreover; ultimately, the question developing is how the secession will play out in terms of finding a balance between the decision of the (very slight) majority of the electorate, and business within the U.K. The first development that needs to be examined is the political manoeuvrings that took place last week when, in Parliament, the Government saw its attempt to ‘ promise to give assurances ’ on a Parliamentary consultation over the fi...

Today’s second post looks at the ever-developing story that the British-based multinational construction firm Carillion has today issued its third profit-warning since July , in addition to its suggestion that it is about to breach conditions attached to loans that it is accountable for. With the increasing utilisation of so-called ‘ Public Private Partnerships ’ and ‘Public Finance Initiatives’, as discussed in a recent post here in Financial Regulation Matters , it is worth discussing the potential effect that this financial bombshell will have; will it cause the socially-integrated company to begin to spiral and ultimately fail, or will it be the latest demonstration of a company that is ‘ too big to fail ’, as one onlooker has suggested today. Carillion is proving to be synonymous with this particular period of Britain’s economic history, with the firm winning a number of lucrative and highly-visible contracts, including skyscrapers in Manchester , and of course the infamou...