Editor's letter
To Societe Generale's detriment, the credit crisis has sent investors scuttling back to safe havens and making flights to quality
Just when you thought it might be safe to go back into the financial markets, Societe Generale (SG) revealed a new way to lose money. But SG can count itself lucky. The cost of the rogue-trader losses at the bank is dwarfed by the gigantic writedowns most investment banks have suffered from the subprime crisis.
Unfortunately for the French bank, this is where its luck runs out. The questions most frequently asked as Structured Products went to press revolved around who might buy the ailing giant, and the state of what they might acquire as part of the deal.
The obvious candidate for a friendly takeover is BNP Paribas. The bank is known to have considered the possibility in the past. Will the French government sanction such a drastic consolidation of its banking industry, especially after making such a mess of its previous amalgamation of state banks? And if not BNP Paribas, who would buy SG?
While SG's share price continues to fluctuate, although not collapse, the most likely candidate seems to be Barclays, largely on the basis that it lost out on buying ABN Amro. All seems feasible, but can you imagine a British bank being allowed to buy one of France's most prestigious and prominent institutions? Xenophobia aside, the French government's principal concern would surely be the damage this could inflict on the country's financial markets. It would presumably mean an end to Paris' ambition to be a major world financial centre.
What do distributors make of it all? Those contacted by Structured Products were generally supportive, but said they had reservations about doing business with SG in the short term. More interesting was the analysis of what is likely to happen at the next meeting at which SG pitches for business. To the bank's detriment, the credit crisis has sent investors scuttling back to safe havens and making flights to quality. On the basis that distributors have now become more interested in credit quality and less concerned about pricing, the tarnishing of SG's previously excellent reputation could well be long-lasting.
- Richard Jory. richard.jory@incisivemedia.com. +44 (0)20 7484 9802.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Regulation
EU states take the slow road to new cross-border services ban
Late national transposition hampers foreign banks’ decisions on location of affected activities
Don’t mention the rules: the fight against prediction market abuse
For the CFTC to regulate new venues effectively, it must first redefine insider trading
Can the US FRTB revamp make the IMA great again?
Banks are finally presented with a viable internal models framework under Basel III’s market risk rules
UK rethinking tougher capital rules for US bank subsidiaries
US endgame draft would trigger UK Basel III trap floor for foreign banks, but PRA is reviewing
EBA proposes drastic overhaul to supervisory data reporting
Revamp will cut back the number of datapoints and integrate overlapping reports
CFTC wants to regulate prediction markets. Is it up to the task?
Former officials echo state gambling authorities’ concerns over agency’s ability to police betting risks
EBA seeks to allay Simm divergence concerns
EU validator pledges to co-ordinate with global regulators, but retains ability to act alone “if needed”
FRTB models find salvation in US Basel III proposal
Changes to P&L attribution test and NMRFs make IMA viable for US banks, risk managers say