– OCC choice
– Crypto crackdown in China
– Antin IPO
– Cleaning of green veins
You say you want a revolution. Willow Omarova, a law professor chosen by the White House to head the US office of the Comptroller of the Currency, is a radical choice for the stilted agency. She advocates removing private bank deposits and giving Americans accounts at the Federal Reserve. That kind of thinking is not right for the body that oversees banks like JPMorgan and Bank of America.
The OCC base is already full ensuring the strength of the largest lenders, among them, Wells Fargo in the throes of scandal. Under former President Donald Trump, the agency split off from other regulators to craft its own rules on financial services in minority communities and confused it with seemingly politically motivated measures on lending. He hasn’t had a permanent boss for months.
Omarova’s out-of-the-box proposals are bold but fall short of OCC’s mission. He does not have the power to reshape the Fed. His push to democratize finance would be better placed to advise Democratic policymakers in Congress. Omarova still needs the approval of every Democrat in the Senate. Financial firms that hold some $ 17.5 trillion in U.S. deposits hope it won’t measure up. (By Gina Chon)
People’s choice. The Chinese Communist Party is not a fan of cryptocurrencies. Ten regulators have crammed into the People’s Republic, explicitly declaring that all crypto activity is illegal. It highlights the asset class’s shortcomings, but also – unintentionally – part of its appeal.
Beijing’s ongoing crackdown is in part aimed at limiting capital flight through digital assets, perhaps an increased risk at this time amid concerns over losses at real estate group China Evergrande. It’s also a question of financial stability, a concern even, say, in the United States. Cryptocurrencies are less useful if their use makes people criminals. The market reaction, a drop in the value of bitcoin and similar tokens, also suggests a closer relationship with mainstream financial markets than supporters like to admit.
Still, cheerleaders see the asset class as a challenge for government-issued fiat currencies. China’s distrust of the decentralized crypto model betrays the fear of losing control. In that sense, the ban strengthens the credentials of bitcoin insurgents and its ilk. This is not a reason most people like crypto, but it is enough to make believers believe. (By Richard Beales)
Candid advice. Voltaire coined the phrase “to encourage others” when someone sets an example to inspire good behavior in others. Antin Infrastructure Partners did something similar with its IPO which raised 550 million euros: Shares of the private equity firm rebounded 25% when they went public in Paris on Friday. It follows an equally enthusiastic debut for London rival Bridgepoint.
Antin specializes in hot infrastructure niches like digital grids and renewables, as well as simpler road and rail assets. This has helped shareholders ignore the tiny float of 15% of the company, as well as the fact that a handful of executives remain firmly in control.
Friday’s jump gives the company a market value of around â¬ 5.1 billion, or 29 times earnings for 2023, according to Breakingviews calculations which assume 20% annual revenue growth and an operating margin of 70%. It’s always a discount for EQT and Partners Group rated peers, which trade over 30 times. Such intoxicating valuations will only “encourage” other buyout barons to follow. (By Christophe Thompson)
Main problem. Rishi Sunak is considering reforms after the collapse of Greensill Capital, the supply chain financier who filed for bankruptcy earlier this year after Credit Suisse stopped buying its commercial invoices. In a letter to a parliamentary committee released on Friday, Britain’s Finance Minister said he was reviewing the country’s “appointed representatives” regime.
This allows unregulated financial companies to do business if they are supervised by another company, known as the principal, authorized by the Financial Conduct Authority. It is woefully obsolete. Originally intended to help individual insurance brokers, it allowed a UK subsidiary of Greensill to operate without direct supervision of the watchdog.
But focusing on this regulatory gap risks missing the bigger picture. Greensill was part of a huge shadow banking system, which the Bank of England says is home to half of the UK’s financial assets. Supervisors find it difficult to collect data from these companies. Sunak acknowledged these “non-bank data gaps” but did not come up with a clear solution. Stopping the next Greensill will require more thought. (By proud Liam)
Point to point. Bhavish Aggarwal connects the dots between the Indian mobility companies he co-founded. Ola competes with Uber for ridesharing, but Ola Electric is the rising star, quickly registering orders for its scooters and considering an expansion of motorcycles and battery-powered cars. It intends to open its digital-only sales platform to competing automakers.
Aggarwal plans to reorganize how the automotive market works by customizing electric vehicles to expand adoption of car and scooter sharing services; currently only 7% of the population uses them. He believes that lower operating costs from the switch from gasoline to battery power will more than triple domestic car sales to 10 million units in the years to come, as the processing of data reduces financing and insurance costs.
Although the plan will require cooperation between industrial silos, Ola and Ola Electric remain separate entities, SoftBank leading the partial overlap of investors. It makes sense to separate companies of different capital intensity, but Aggarwal will need to find creative ways to extract value. (By Una Galani)