Research Papers and Training Agendas

You can download from here the overviews of all our training courses and also a significant body of research papers issued by the company.

*NEW*

Wolfsberg Group Country Risk FAQs – we need to see the Competition Law advice behind this paper

We have today sent a further call to Wolfsberg Group, this time to publish the Competition Law advice they must have taken before issuing their Frequently Asked Questions about the Country Risk component of bank’ Risk-Based Approach to AML/CFT.

Wolfsberg is a major organisation with 13 of the world’s Global Systemically Important Banks as its members, and its emission have an impact on the marketplace for international banking services far beyond its own membership.

This being the case its action have a priori a Competition Law dimension.

We have asked that they publish their advice received on the matters of both the generality of their organisation and governance and on the specific matter of the Country Risk FAQs, to then be followed by their advice on all the other matters in which Wolfsberg Group has intervened.

Download the full paper here

Virtual Accounts and “On behalf of” payments & receipts: the Wolfsberg Group needs to make major changes to its Payment Transparency Standards

We have called upon Wolfsberg Group to make major changes to the section in the Wolfsberg Group’s Payment Transparency Standards 2017 on “On behalf of” payments.

The guidance is far from complete. In our view it has the effect of giving a clean bill of health to a range of services that are quite suspect given our understanding and analysis of applicable regulations on Anti-Money Laundering and Countering the Financing of Terrorism, or AML/CFT as they are known for short.

All Wolfsberg Group’s 13 members figure in the Financial Stability Boards list of the world’s 30 Global Systemically Important Banks. Wolfsberg guidance has a meaningful impact on market practice, and on international banking services. What is more, they include in their number some of the main proponents of these financial structures, so there is an element of students marking their own homework.

The section that exists in the Payment Transparency Standards 2017 only deals with payments i.e. with outgoing payments looked at from the point of the view of the remitting banks. Even that section needs to be expanded.

There needs to be a whole new section on receipts, looked at from the angle of the beneficiary bank. This side is not addressed at all.

We are also asking that Wolfsberg Group confirm explicitly that any financial institution that issues unique banking details associated in its own records with a specific legal person is an Account Servicing Institution for that legal person and must have a compliant Customer Due Diligence file on the legal person.

Download the full paper here

Bruges Group paper: the Euro’s Battle for Survival – into the Red Zone

We had a paper published by Bruges Group setting out the extreme difficulties in which the Eurozone finds itself, after years of economic stimulus totalling over 3% of GDP per annum and the build-up of both the ECB’s Asset Purchase Programmes and the loans within the TARGET2 system. These imbalances are insoluble, and there is a big bullet to dodge: the treaty obligation on each Member State to reduce its national debt:GDP ratio to 60% by 2030. Several Member States are not yet even in fiscal surplus, let alone on a compliance trajectory, and they cannot turn their situation around without shrinking GDP and making compliance even harder to reach.

There is only one pathway available: completion of Monetary Union, by

  • forcing all non-Eurozone Member States into the Euro;
  • converting the Eurosystem into a legal person and the National Central Banks into its branches;
  • installing an EU-wide Bank Deposit Insurance System;
  • transference of Member State government debts onto the legal person of the European Union, meaning they become the joint-and-several liability of all Member States.

It is that or risk a total economic collapse. No pressure, then.

Download our own version here

Download the Bruges Group version here

Call to the Wolfsberg Group to withdraw its guidance on the SWIFT Relationship Management Application of 2016

Lyddon Consulting has issued a challenge to the Wolfsberg Group of leading international correspondent banks that it withdraw its 2016 guidance “Wolfsberg Guidance on SWIFT Relationship Management Application (RMA) Due Diligence”.

Bob Lyddon, director of Lyddon Consulting and former General Secretary of the IBOS international banking club, says: “The guidance has given a clean bill of health to situations where RMA is in place in support of a correspondent banking relationship – what Wolfsberg calls a “customer” RMA. But it has brought into question the other applications of RMA – what is termed a “non-customer” RMA. The outcome of the Wolfsberg guidance on “non-customer” RMA has arguably been more detrimental to the marketplace than the materialisation of the risks the guidance was meant to eliminate”.

Download here

FBME and its resolution by the Central Bank of Cyprus

FBME has become a “cause celebre” because its treatment by Cyprus’ financial regulators bears few hallmarks of the genuine resolution of a bank that was out of capital and out of resources.

Instead it looks more like a case of scapegoating a small, foreign bank in order to attract attention away from issues across the entire banking sector.

Cyprus received its bailout from the Troika of the IMF, the ECB and the EU in exchange for getting tough on banks that did not run a proper AML/CFT regime – and FBME presented itself as a convenient target.

Download here

Ripple – the big story of Q4 2017

Research paper issued on 1st February 2018.

#Ripple, #XRP, #cryptocurrency, #cross-border payments, #international payments

Ripple is one of the most talked-about phenomena in the cryptocurrency world, and its profile reached new heights in Q4 2017, both because of its own conference (in the same place and the same time as that of SWIFT, the organisation Ripple aims to take down), its own PR machine, and the price of its XRP currency – rising from USD0.25 on 10th October to USD2.25 at the end of the year.

But because XRP is a “commodity” and not a form of money, the monetary authorities take no position on it. Because XRP is not listed on a regulated stock exchange, Ripple is able to talk about it and deal in it in a way that is beyond the scope of investment regulators. People part with real money (in a fiat currency) to acquire XRP, but XRP cannot be spent in shops: it is not legal tender.

As such XRP – and Ripple – float in the ether (though not in the ether-eum).

Download here

Unicredit – out of the frying pan?

Research paper issued on 11th December 2017.

#Unicredit#, #Italian banking, #Italian bad loans, #Italian non-performing loans, #ECB, #Eurosystem

In early 2017 Unicredit launched a rights issue for €13.0 billion to recapitalise the bank. Less clear was that it had already taken provisions against its loans and other difficulties – €12.2 billion –  such the the proceeds of the rights issue had already been used up before the issue prospectus had been printed. Still more concerning is the disclosure that, when the 2016 annual was finally issued, the charges taken in Q4 2016 were €14.3 billion, swallowing up the rights issue, the entire 2016 profit, and the bank’s entire reserves. Reserves actually stood as -€2.5 billion on 31/12/16. In addition to this Unicredit persists with the Internal Risk-Based Approach to credit risk analysis that has led it to have over 20% of its loans go onto Non-performing status, and it uses its capital twice: to support its business in Italy and to support the business of its substantial foreign banking presences. If that were not enough, the critical FINO project has not been completed: the project to clear out the worst of Unicredit’s Non-performing loans in Italy. It appears that the market’s valuation of the FINO portfolio was lower than the heavily-discounted value at which Unicredit was holding it after the €3.5 billion write-down it took on the portfolio in Q4 2016. The ECB has launched an investigation into whether cash payments were made to induce the securitisation vehicle company to buy the FINO portfolio at a value higher than the market valuation, which then spared Unicredit from taking a further loan-loss write-down. If this is the case there would be extremely serious repercussions.

Summary of Unicredit – out of the frying pan: Download here

Full version of Unicredit – out of the frying pan: Download here

The European Central Bank is bound upon a wheel of fire: it cannot raise interest rates or reduce its Asset Purchase Programmes without a risk of bankrupting itself

Research paper issued on 31st October 2017

#TARGET2, #ECB, #Asset Purchase Programmes, #Euro sovereign debt, #Eurosystem

The Asset Purchase Programmes (“APPs”) are the main plank’s in the ECB’s monetary policy regime. Through it the ECB uses the other Eurosystem members – the National Central Banks or “NCBs” – to buy assets and release cash into the banking system. The programme has been running at €60 billion a month and for some time, and the cash side is settled through the TARGET2 system, the data on which gives an indication of the total size of the assets purchased: around €2 trillion. No indication, however, is given of the marked-to-market value of the APP portfolio and that is a concern. The ECB’s accounts do not show this, and if there if not already a substantial unrealized capital gain, even a small rise in yields on the bonds would create a loss exceeding the ECB’s capital and reserves. In fact, a 10 basis point rise in yields would be sufficient, the size of movement that can happen within the course of a trading day.

Download here

Terms of business

Here are Lyddon Consulting’s Standard Terms of Business: Download here

Training courses

We have grouped the training courses into three captegories:

  1. Banking regulation
  2. International banking
  3. Payments and Cash Management

Courses on Banking regulation

SEPA Executive Briefing: Download here

SEPA Compliance: Download here

SEPA Strategic Challenge: Download here

European Payments Regulatory Package: Download here

Payment Services Directive 2: Download here

4th EU Anti-Money Laundering Directive: Download here

Ringfencing and the EU Bank Recovery & Resolution Directive: Download here

Courses on International banking

Basel III Capital & Leverage: Download here

Basel III Liquidity: Download here

Bank Payment Obligation: Download here

Supply Chain & Export Finance: Download here

SWIFT for Corporates: Download here

Courses on Payments and Cash Management

Domestic & Cross-Border Payments: Download here

Basics of Cash Management: Download here

Intermediate Cash Management: Download here

Advanced Cash Management: Download here

Fintech: Financial Technology New Entrants: Download here

TARGET2 imbalances

A paper written in August 2017 showing the huge and growing unsettled balances in TARGET2 system, between – apparently – the TARGET2-participating national central banks and the European Central Bank. Closer inspection reveals that the orginal construct does not involve the ECB at all, but 552 separate current accounts held by the TARGET2-participating national central banks with one another. These positions are “netted and assigned” to the ECB in a two-stage process that results in a single figure on the ECB’s balance sheet. The legal documents that enable this have not been disclosed but should – if this were an arrangement between a commercial bank and its customer – require the different legal entities in the customer to declare themselves jointly and severally liable for one another’s debts. Were this to prove to be the case in TARGET2, it would undermine the risk-limitation measures on which Member States have insisted, and in effect make each one liable for the debts of all the others: Download here

Banco Popular Espanol

A presentation written in June 2017 about the takeover of Banco Popular Espanol by Santander, supposedly in line with the EU Bank Recovery and Resolution Directive but actually indicating the inadequacy of that Directive and instead using the “White Knight” technique of saving a bank that is about to go down: Download here

Virtual Accounts

A paper written in May 2017 about Virtual Accounts, a technique for financial institutions issuing accounts to customers that appear to be domiciled in certain countries and with certain institutions, when actually only one institution holds a real account and has done full Anti-Money Laundering/Countering the Financing of Terrorism due diligence on the customer, and then only on the customer that holds the real account: Download here

The Brexit Papers

Here are the eight Brexit Papers, issued between October 2016 and May 2017 and encapsulating the extreme financial detriments of the UK’s membership of the EU.

One – the UK’s risks in case Deutsche Bank were to fail: Download here

Two – the Euro as the central objective of all EU laws and regulations: Download here

Three – the distortion of the EU payments market caused by EU regulations: Download here

Four – the UK’s lost corporation taxes and GDP caused by abuse of the EU Freedom of Establishment: Download here

Five – the Netherlands’ tax regime and how it sucks corporation tax out of the UK: Download here

Six – the UK’s liabilities for the debts of EU mechansisms and of other Member States: Download here

Seven – the £30 billion per annum cost to the UK of EU Freedom of Movement: Download here

Eight – the total of £1.1 trillion of contingent liabilities and £51 billion of annual costs that represent the UK’s EU membership: Download here

Brexit Flashcards

These are the fantantastic Brexit Flashcards, written to supplement The Brexit Papers: Download here

Bruges Group papers on the UK’s financial liabilities that come with EU membership

Here are the two papers written for the Bruges Group on the UK’s financial liabilities deriving from EU membership.

The first one was written in 2012: Download here

The second was written for the UK’s referendum on continued EU membership: Download here

Scottish independence

Here are the main papers issued by Lyddon Consulting about the Scottish independence referendum in 2014.

Firstly about the currency – why Scotland must keep the pound and why it can’t: Download here

Secondly about the results of the Smith Commission that devolved more powers onto Scotland: Download here