Tuesday, July 17, 2012

HSBC: The World’s Money Laundering Bank?

As the current US Senate investigation continues to uncover HSBC’s been laundering money of dubious clients, will Europe’s largest bank be now known as the: “World’s money laundering bank”? 

By: Ringo Bones 

Well, I was really surprised when the BBC aired a news item in July 17, 2012 that uncovered that HSBC – the: “World’s local bank” – according to their adverts are engaging in money laundering for over ten years according to a recently released report by a US Senate investigation. A US senator who led the investigation even said that the corporate culture at HSBC is “pervasively polluted”. The bulk of the money laundering investigation primarily focused on HSBC American arm laundering the drug / narco profits of Mexican drug cartels – which was recently uncovered to be as much as 7-billion US dollars between 2007 and 2008. Will this recent money laundering investigation be the ruin of the “world’s local bank”? 

Given that HSBC primarily deals with private clients, the recent US Senate investigation could be quite damning to the reputation of Europe’s largest bank due to the fact that the investigation also uncovered that HSBC’s regulators failed to take action. Other “suspicious funds” are also under investigation – including suspected Al Qaeda sourced funds that date back 10-years ago and scores of “secret financial dealings” with states currently under UN sanctions like Iran and Syria. 

Friday, July 13, 2012

Facebook Adverts: A Waste of Money?

Are companies wasting their money buying Facebook adverts given that the majority who chose to click the “like button” are either fake Facebook profiles or users who have no interest in the company’s products or services whatsoever? 

By: Ringo Bones 

A recent investigation recently uncovered by the BBC had recently uncovered a somewhat sobering fact about companies paying good money to buy advertising on Facebook and other leading social media. Majority of users who chose to click the “like button” are either fake Facebook profiles or users who have zero interest whatsoever on the company’s products and services being advertised – i.e. just clicking the like button at random. But does this mean that companies buying advertisement time on Facebook and other leading social network sites are just really wasting their money? 

A recent investigation done by the BBC shows that a typical company buying a Facebook advertisement space has on average gets 3,000 like clicks during the first 24 hours of their ads being uploaded. Companies based on the United States and Europe - some that don’t even have brick and mortar shops in the more “austere” parts of South-East Asia and Africa – usually still get a lot of like button clicks from these places. Is this really a tad suspicious from an I.T. standpoint? 

Sadly, the powers-that-be running Facebook still doesn’t give a rat’s ass about fake profiles and users because these fake Facebook users still fatten the famed social network’s bottom line. Unless these fake Facebook users violate the social network’s established community standards – they will more likely continue to opt to choose to click the like button at random. Like are there really high-end audio enthusiasts in the Sudan who also share my passion on single-ended triode amplifiers?

Tuesday, July 10, 2012

Barclays LIBOR Rate Manipulation: In Banks We Trust?

Though this somewhat riveting financial news story is still developing, will the 453-million US dollar fine and subsequent civil lawsuit against Barclays for interbank lending rate manipulation herald a more transparent banking system? 

By: Ringo Bones 

The recent LIBOR Rate manipulation scandal first came to light to us in the general public when the major news providers did an investigative news reporting on Barclays being fined 453-million US dollars back in June 28, 2012 for manipulating the interbank lending or LIBOR Rate. Whether this will lead to increased transparency to the world’s banks and other financial institutions is still open to debate since this recent “financial scandal” could yet become another long-winded economic / financial epic akin to the recent Greek Debt Crisis. 

Leading tenured economists now cite that the very way the LIBOR Rate is regulated is very much outdated – compared to back in 1984 - in our somewhat austere economic climate of our post 2008 Global Credit Crunch world. But Barclays admitting of the “financial master stroke” of LIBOR Rate manipulation looks suspiciously criminal from the FSA’s point-of-view. 

By July 2, 2012, Barclays chairman Markus Agius – who held the position since 2006 – resigns as the rate fixing scandal ripples throughout the financial world. The next day, Barclays CEO Bob Diamond resigns after accusations of using Markus Agius as a “fall guy” on the LIBOR Rate fixing scandal became headline news in the financial world. And by the way, Markus Agius is also the head of the UK Banking Association. As the Barclays’ “top brass” reshuffles, the FSA cited that Barclays conduct was so serous and widespread that the agency also placed the RBS and HSBC under their watch list for complicity with Barclays on the LIBOR Rate fixing scandal. So what is this “LIBOR Rate” anyway? 

LIBOR Rate is defined as the rate at which an individual Contributor Panel bank could borrow funds, where it is to do so by asking for and then accepting inter-bank offers in reasonable market size, just prior to the 11:00 AM London time deadline. The rate at which each bank submits must be formed from the banker’s perception of cost of funds in the interbank market. The London Interbank Offered Rate is the average interest rate estimated by leading banks in London that they would be charged if borrowing from other banks. It is usually abbreviated to LIBOR or Libor, or more officially to BBA Libor for British Bankers’ Association Libor or the trademark bba libor. It is a benchmark – along with the Euribor – for interest rates all around the world. 

LIBOR Rates are calculated for different lending periods – overnight, one week, one month, two months, six months, etc. – and published daily at 11 AM London time by the British Bankers’ Association. Many financial institutions, mortgage lenders and credit card agencies set their own rates relative to – and typically higher than – the Libor. The current procedure of determining the LIBOR Rate was introduced back in 1984 when it became apparent that an increasing number of banks were trading actively in a variety of relatively new market instruments – namely: interest rate swaps, foreign currency options and forward rate agreements. 

Back in July 4, 2012, then Barclays CEO Bob Diamond declared that he is not resigning without a fight and that he may divulge evidence that UK financial regulators – including the Bank of England’s deputy governor Paul Tucker of giving Barclays the carte blanche – i.e. full discretionary powers – to reduce the somewhat high LIBOR Rate that was strangling the UK economy during their “wink-and-nod” laden phone call. Bob Diamond is due to be “grilled” by the MPs whether the Bank of England and Whitehall officials will be implicated in the recent LIBOR Rate manipulation scandal is yet to be determined. While the UK’s Serious Fraud Office (SFO) launches its own LIBOR Rate manipulation investigation.  

At present, the LIBOR interbank lending key rate plays a major role in global financial markets. But many tenured economists cite LIBOR as an anachronism and it doesn’t really work in practice. And the oft-cited proof of this was the global market events that lead to the 2008 Global Credit Crunch. Does the LIBOR Rate need to be reformed or to be replaced entirely by something more suitable to our increasingly globalized financial markets? 

Monday, July 2, 2012

Would Greece Be Better Off Leaving the Euro?

Even though the majority of the newly elected Greek cabinet is staunchly pro-euro and pro-bailout, would Greece be better off leaving the Eurozone? 

By: Ringo Bones 

Before the Greek pro-euro and pro-bailout political parties were elected into office in Greece’s recent election, many tenured economists – strangely none of them appeared to be Greek – suggested that Greece should leave the euro and reintroduce the good old Greek drachma as the best solution to the country’s ongoing debt crisis. These “tenured economists” oft cite on how the Argentine government solved the Argentine economic crisis of 1999 to 2002 in which the Argentine government drastically devaluated their own currency – the Argentine peso – in order to end its own debt crisis; a method which surpasses the dire expectations of economists at that time. The question now is: Will the “Argentine Method” work in solving Greece’s ongoing debt crisis? 

Before we proceed further, here’s a scope of the current Greek debt crisis – every Greek man, woman and child now owes 31,000 euros to the EU and other foreign lenders. An epic problem in which a few years of EU sanctioned austerity measures seems unable to solve. The Greek government’s rationale for joining the Eurozone when the euro was first introduced back in the New Year’s Eve of 2002 was that it was hope that EU members with weak economies – especially Greece – would be helped by the more economically prosperous EU members. Strange as it seems, Greece’s current dire economic situation mirrors that what it had experienced back in 1998. But will a Greek euro exit and the reintroduction of the good old Greek drachma and then drastically devaluating it – akin to how Argentina solve their own economic crisis back in 1999 to 2002 – be the ideal solution to Greece’s current debt crisis? 

Strange as it seems, the BBC sends some of its field reporters to Greece a few months before the recent election in order to interview everyday Greeks experiencing their country’s crippling financial crisis first hand. The report had shown that a little over 50% of Greeks believe that exciting the Eurozone and reintroducing the Greek drachma won’t solve its current economic crisis because they believe that their current economic problem is primarily caused by the collusion of corrupt Greek politicians and big financial firms – both Greek and foreign – not paying their full tax rates. Over half of the Greeks say that a reintroduction of the old Greek drachma and then drastically devaluating it will only give license to corrupt Greek politicians to print their own money.