IFR 08.24.2019

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Top news


Banks, investors braced for no-deal Brexit


„ People & Markets Finance industry steps up preparations ahead of Brexit deadline


BY CHRISTOPHER WHITTALL


Investment banks and investors
are preparing for the worst ahead
of the October 31 Brexit deadline,
as the industry faces up to the
prospect of the UK leaving the
%UROPEANû5NIONûWITHOUTûAûDEAL
The European Central Bank
warned in a report earlier this
month that ”banks have
TRANSFERREDûSIGNIlCANTLYûFEWERû
activities, critical functions and
staff” to EU-based entities than
needed and pressed lenders to
SPEEDûUPûTHEIRûPLANSûTOûDOûSO
But industry executives say
they have put the additional few
months provided by an
extension to the Brexit deadline
to good use, shifting more
activity out of London to ensure
trading with EU-based
counterparties can continue
regardless of whether a deal is
AGREED


In one sign of how the landscape
HASûCHANGED ûTHEû'ERMANûEXCHANGEû
and clearing house Eurex has said a
SIGNIlCANTûAMOUNTûOFûBANKSû
futures business, which
traditionally resided in London, has
NOWûMIGRATEDûTOûMAINLANDû%UROPE
Senior bankers still appear
reluctant to relocate more staff
before the political situation
BECOMESûCLEARERû"UTûTHEYûAREû
facing up to the increasingly
likely prospect of the UK and the
EU failing to reach an
AGREEMENT
“At this point you have to be
PREPAREDûFORûTHEûWORSTû4WOûTOû
three years ago ... generally
PEOPLEûWEREûCONlDENTûTHATûAû
deal would be achieved at some
POINTû)ûDONTûTHINKûTHEREûISûTHATû
MUCHûCONlDENCEûTHATûAûDEALûISû
going to emerge like a rabbit
from a hat,” said Eric Litvack,
head of regulatory strategy at
3OCIETEû'ENERALE

THE CLEARING QUESTION
The plumbing underpinning
lNANCIALûMARKETSûISûONEûAREAûWHEREû
what could be the post-Brexit
LANDSCAPEûHASûSTARTEDûTOûEMERGE
In the futures market, more and
more banks have moved both their
client business and their own house
business to an EU-based clearing
broker since the original Brexit
deadline in March, said Matthias
'RAULICH ûEXECUTIVEûBOARDûMEMBERû
ATû%UREXû#LEARINGû!SûAûRESULT ûTHEû
amount of initial margin held by
UK-based clearing members at
%UREXûHASûDECREASEDûBYûALMOSTûû
SINCEûTHEûENDûOFû
“With the recent dynamic in
the UK, people who haven’t
shifted their entire portfolio
have reactivated their activity”
to move to their EU 27 entities,
SAIDû'RAULICH
The location of central
counterparties clearing the
53TRNûOVER
THE
COUNTERû

derivatives market has been one
of the main bones of contention
between UK and European
POLICYMAKERSû,#(û'ROUPSû
SwapClear currently clears the
vast majority of the interest-rate
swap market out of London and
EU regulators have said that can
CONTINUEûUNTILû-ARCHû
Eurex has been gradually
building out its own offering, nearly
doubling the amount of clients
signed up to its swaps clearing
SERVICEûTOûALMOSTûûTHISûYEARû)Tû
has also grown clearing volumes in
euro derivatives, with average daily
VOLUMESûINCREASINGûBYûALMOSTûû
in the second quarter compared to
THEûPREVIOUSûYEAR
“In terms of onboarding activity,
the key element is preparing for
THEû"REXITûSCENARIO vûSAIDû'RAULICH

REPAPERING
3'Sû,ITVACKûSAIDûTHEûADDITIONALûSIXû
months from the delayed Brexit

Embattled Swedbank fights back


with blowout US dollar AT


„ Bonds Demand for US$500m deal peaks over US$7bn despite money-laundering scandal


BY HELENE DURAND, TOM REVELL


SWEDBANK secured a blowout for
ITSûlRSTû!DDITIONALû4IERûûSINCEû
being caught in a money
laundering scandal, driven in
part by a desperate hunt for
YIELDûBYûCREDITûINVESTORS
Buffeted by fallout from the
crisis, the Swedish bank has shied
away from public issuance for
MOSTûOFûûANDûONLYûVENTUREDû
OUTûINTOûTHEûCOVEREDûMARKET
4HEûBANKûlREDûITSûCHIEFû
executive in March, while its
subordinated debt has been under
pressure after its Estonian business
was alleged to have broken anti-
MONEYûLAUNDERINGûRULES
“The current situation with
ongoing investigations and the
uncertainty of their outcome is
known to the market and is
REmECTEDûINûTODAY|SûTRANSACTION vû


SAIDû'REGORIû+ARAMOUZISûHEADû
of investor relations at
3WEDBANK
h4HEûBANKSûlNANCIALû
performance has continued to
be solid, with a strong capital
position, resilient asset quality,
conservative liquidity position
and relatively strong
PROlTABILITY ûANDûHASûPROVIDEDû
THEûCOMFORTûANDûCONlDENCEûTOû
EXECUTEûTHISûDEAL vûHEûSAID
With huge swathes of the bond
MARKETûNOWûlRMLYûINûNEGATIVEû
yield territory, the bank hoped to
entice investors with a juicy
RETURNûONûITSûRISKIESTûFORMûOFûDEBT
Leads Bank of America Merrill
Lynch (structuring), Barclays, BNP
Paribas, Citigroup, Swedbank and
UBS started marketing the no-
GROWû53MûPERPETUALû
NON
CALLû3EPTEMBERûûATû
INITIALûPRICEûTHOUGHTSûOFûû

area (semi-annual coupon) early
LASTû4HURSDAYûMORNING
h)04SûLOOKûABOUTûBPûWIDEûTOû
SECONDARIESûANDûMAYBEûBPû
wide to where we see fair value,”
ONEûFUNDûMANAGERûSAID
“Obviously the small no-grow
SIZEûWILLûHELPûTHEMûDRIVEûTHEû
deal in, but also I’d hope they’re
cognisant of the AML overhang
and the need to leave some
PREMIUMûONûTHEûTABLEv
But guidance was revised to
ûAND ûASûTHEûBOOKSû
continued to swell past US$7bn,
THEûCOUPONûWASûULTIMATELYûlXEDû
ATû ûINSIDEûWHEREûINVESTORSû
ANDûBANKERSûSAWûFAIRûVALUE
There were substantial drop
OUTSûFORûTHEûlNALûBOOKS ûWHICHû
STOODûATûOVERû53BN
“This is something we
thought would go well, but no
one predicted books would be

over US$7bn and frankly no one
HADûEXPECTEDû vûSAIDûAû
$#-ûBANKERûATûONEûOFûTHEûLEADS
+ARAMOUZISûSAIDû3WEDBANKû
always aims for a fair market
price that takes investors’
INTERESTSûINTOûCONSIDERATION
“This time it was even more
IMPORTANT vûHEûSAIDûh4HEûOUTCOMEû)û
BELIEVEûREmECTSûTHISûAPPROACHv
The trade, which is expected
to be rated Ba1/BBB/BBB, offered
a premium versus peer Svenska
Handelsbanken, whose
53MûûPERPûNON
CALLû
-ARCHûû!4ûWASûTRADINGûATû
ûONûAûYIELD
TO
CALLûBASIS
"UTûTHEûLEADû$#-ûBANKERû
noted it landed close to Nordea,
QUOTEDûINûTHEûMIDûS
“It’s probably most accurate to
say they’re back within their
PEERS vûHEûSAIDûh4HEIRû
secondaries have traded
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