The Financial Pulse

September 2023

The road to net zero is a complicated journey with multiple diversions, forks, and confusing terrain, not leastexemplified by the contention that it can be achieved while actually increasing fossil fuel production.

September 2023

The announcement of new proposals – referred to as the “Basel III Endgame” – to bring the regulatory capital framework in the United States into line with the final provisions of Basel III is well timed following well-publicized instances of the vulnerability of the US banking sector earlier in the year.

July 2023

“Higher for longer” is a mantra with which observers of the global interest rate regime have been familiar with for some time. As central banks worldwide remain resolved to stay the course of rate rises to counter obstinate inflation, so the effects of ‘normalized’ rates are beginning to bite in the form of rising levels of corporate defaults.

July 2023

The recent statement by the CEO of one of the world’s largest asset managers that henceforth he would stop using the ‘weaponized’ term ‘ESG’ is clearly a consequence of a backlash against ESG investing that has been building for years.

June 2023

It is more than a decade since open banking arrived on the scene to a reluctant banking sector. That is just one reason why it has yet to reach its potential but it is in less developed markets where its impact promises to be revolutionary.

June 2023

Central bank digital currencies (CBDCs) have been characterized as a solution in search of a problem, but central banks seem resolute in their ultimate adoption, in spite of implied threats to commercial banks and financial stability.

May 2023

It is widely accepted that climate change and how we respond to it has significant consequences, both for the global economy and for society in general. While banks and other financial institutions are increasingly dealing with the effect of both physical and transition climate-related risks on all aspects of their operations, regulators must concern themselves not only with the impact of these risks on individual institutions but also on broader financial stability. A recent report by the Financial Stability Board (FSB) sets out the agenda for regulators and the emerging new regime for financial institutions.

May 2023

The spike in interest rates over the past couple of years has transformed the banking landscape and placed immense pressure on individual institutions, leading to dramatic rescues in the US and Switzerland, and raising the dual spectres of systemic failure and a credit crunch.

March 2023

After a fallow period following the global financial crisis, global macro funds last year delivered their best performance since 2008, with aggressive bets on soaring interest rates. This comes as no surprise, as macro funds are supposed to thrive during seismic shifts in the macro regime. Will this prove to be a one-off for macro funds, or have we entered a new era of macro volatility in which this industry subset continues to thrive?

March 2023

Inflation targeting has been used as a monetary policy tool by central banks since the late 1980s, but recent events have raised the question as to whether the sacrosanct 2% target should be raised. What would be the implications of setting a higher target, and would it help solve an inflation crisis such as that currently being experienced?

February 2023

The risks associated with greenwashing – false/misleading marketing regarding the sustainability attributes of a product or service – are on the rise with signs that net-zero and other commitments made by some members of the financial sector may not be credible. But identification of greenwashing practices remains problematic as the limitations of agencies charged with evaluating ESG practices become apparent.

February 2023

As part of its “Coordinated Plan on Artificial Intelligence,” the EU has proposed a regulation that sets out harmonized rules on artificial intelligence. This addresses “the risks and problems linked to AI, without unduly constraining or hindering technological development or otherwise disproportionately increasing the cost of placing AI solutions on the market.” Many other countries are also looking at introducing legal frameworks around the use of AI. Why are such regulations emerging and will they improve or hinder the uptake of AI?

December 2022

While the failed crypto exchange FTX has heightened uncertainty over this asset class, another potentially seismic event for the industry took place recently when the Ethereum blockchain merged with another blockchain (Beacon Chain). “The Merge” saw Ethereum switch its verification system from the established proof-of-work (PoW) protocol to a proof-of-stake (PoS) approach, with major implications for sustainability, scalability, and other factors related to blockchains.

December 2022

Many commodities have become key inputs to the global economy, but their production is often associated with processes that have serious environmental and ethical issues – deforestation, greenhouse gas (GHG) emissions, and forced/child labor, to name but a few. Are the negative impacts of commodity production inevitable or can sustainability-linked initiatives ensure the commodities sector plays its part in the green transition?

October 2022

With many economies bracing for downturn and a higher interest rate environment, a sharp spike in default rates is a likely prospect. What steps should banks and other lenders take to manage this?

October 2022

Around the world, many economies are either in recession or heading toward one as a result of the inflation crisis and the associated policy response from monetary authorities. But what exactly is a “recession,” what happens during it, how long does it last, and how does it end?

September 2022

For many companies, going public is a landmark moment that signals their current success and future ambition. An initial public offering (IPO), which is the most common way of getting a public listing, is an expensive and time consuming process that also creates major ongoing costs and onerous compliance obligations but also brings with it significant benefits. But following a record 2021, activity in 2022 is comparatively disappointing.

July 2022

For the past century the US dollar has enjoyed unrivalled supremacy in global trade and finance. But the war in Ukraine and subsequent imposition of sanctions on Russia – the so-called “weaponization of finance” – has drawn attention to this dominance. It has also given pause for thought to those who would look for an alternative to the present regime. But in spite of major incentives for some countries to diversify away from the greenback, there remains a lack of credible alternatives.

July 2022

One of the unforeseen consequences of the war in Ukraine has been a re-evaluation of industry categories hitherto understood to be contrary to economic, social, and governance (ESG) principles. This, in turn, has also exposed the limitations of ESG as a convenient catch-all term for ethical investing.

June 2022

Around the world major economies are grappling with an extraordinary bout of inflation that has put to an end a disinflationary regime that lasted for 40 years. The euro area hit a record 8.1% rate in May. The UK’s consumer price index (CPI) rose by 9% in April – a rate not seen since the early 1980s. The Japanese producer price index (PPI) rose to 10% year-on-year the same month. Germany’s Chamber of Industry and Commerce expects inflation to reach 7.7% in 2022 – double last year’s rate in this the most inflation-phobic of countries.

June 2022

Investment is a perpetual search for superior returns relative to risk. At different points in time, various asset classes came into vogue. In the 1970s, gold was in favor. The 1990s saw emerging markets take on a new prominence. This century has seen the rise of alternatives.

May 2022

The public appetite for sustainable investment is by now well understood and something that is uppermost in the minds of those responsible for the marketing of investment fund products. But the ability of concerned investors looking to target funds that adhere to environmental, social, and corporate governance (ESG) standards is compromised by confusion over terminology related to investment practices.