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.


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

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

Terms of business

Here are Lyddon Consulting’s Standard Terms of Business: 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