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Following on from the recent discussion regarding bank logos, this post (from this week’s cavalcade) made me think that perhaps we could do something with Australian bank names.

In the spirit of French Connection UK, then, suggestions are requested for bank names relevant to Australia (or New Zealand) that would have as big an impact as the name FCUK did.

The best entry will be close to an existing name, have real impact and would be legal to put on the outside of a bank branch.

Warning, though – anything outright obscene will be summarily deleted.

I will very irregularly have any time for a full post over the next few weeks due to work pressures. I seem to be spending most of my time here trying to sort out one commenter on what I believe to be his misunderstandings of banking. Oh well.

Just for your reading pleasure, though, I read a very good post regarding the role and future of the Credit Ratings Agencies on the usually excellent “The Sheet” today. Have a read – it is worth it.


The agencies proved that they are poor at rating complex structured finance products. Their approach to rating sub-prime mortgage backed securities was not sufficiently rigorous and their models for assessing other more complex products were inadequate.

By virtue of this, their opinions on these products should now be viewed as being of little value and the market should effectively withdraw the agencies’ ‘licence’ to rate such products. This will open the door for new specialist structured finance ratings agencies to enter the market.

This seems a better approach than more regulation and the unintended consequences that could result.

If you are in the business of reading banking news on a regular basis please subscribe. It may help in your understanding of what banks actually do.

I’m in KL on a job for a few days, which is why things have been fairly slow around here.

It’s always good to get out for a few days for a reminder that there are always differing ways to do the same thing. I can’t really say why I am here, so I will just give a few impressions. Sorry for the vaguely twitterish post, but it’s all I can do at the moment.

It is almost 30 years since I was last in Malaysia other than on transit through the airport, so the first thing that hit me here was the sheer number of freeways everywhere. They are not only normal freeways, but most of them are that most expensive way of building them – elevated. Once I got to breakfast I was reminded of one of the more annoying things.

A lot of the time we whinge about the press in Australia. Other than the AFR, the press is pretty ordinary, with the proprietor’s views being over-represented. It is annoying, but there are normally dissenting views around.

Picking up the paper in the morning to read over breakfast I was reminded of how bad a government controlled press can be. Both of the major papers gave exactly the same priorities to exactly the same stories – and all of those were to pillory the opposition (always referred to as the opposition, even in those states where they are in government), explain why any opposition attacks were wrong or to glorify the BN government. It took about 20 pages to get through to any international news. Incidentally, almost all criminal acts reported in the papers were attributed to “foreigners” (read as Indonesians). Really annoying.

That said, they are better than the paper I remember from Indonesia when I was living there before the fall of Suharto in that they mention the opposition, but they are not that much better.

To me, that sort of reporting does tend to increase country risk as it allows the government to get away with some sillier actions without any real threat of domestic criticism. It also increases the power of rumour as people tend to believe the rumour rather than the papers.

That said – there is a lot to like here. There is substantially more wealth here than 30 years ago – the widespread poverty has now been reduced (but not eliminated) and I can go for a walk much more confidently than I remember doing a long time ago. That or the absence of my parents who may have been a little over protective.

The other thing to note is the expansion of the Shari’a compliant financial system. The advertising is everywhere and there is clearly some serious business being done in it. It may not meet the more narrow interpretation being used in the Gulf of what is Sharia compliant, but they are plainly turning a lot over.

Back to more normal service (including an update on the Australian Pillar 3 reports) next week.

This one was pointed to by financialart. Well worth a look. The full show is an almost hour-long show on a London analyst who gives up the City and heads bush to do some “real world” trading.

Money quote (on entering Sudan) “Stratightaway I can tell I am going to have to adjust to a different way of doing things. I’ve already been ripped off, I’ve been lied to, I’ve been taxed, I’ve been fined – and that’s just getting my passport stamped.

Anyway – enjoy. The other four episodes are on youtube – starting here.

I don’t often post jokes, but some of these were banking relevant and appealed to my sense of humour (yes, I do have one):

The Top Twelve Indicators that the economy is bad (US version):

12. CEOs are now playing miniature golf.

11. I got a pre-declined credit card in the mail.

10. I went to buy a toaster oven and they gave me a bank.

9. Hotwheels and Matchbox car companies are now trading higher than GM in the stock market.

8. President Obama met with small businesses – GE, Pfizer, Chrysler, Citigroup and GM, to discuss the Stimulus Package.

7. McDonalds is selling the 1/4 ouncer.

6. People in Beverly Hills fired their nannies and are learning their children’s names.

5. The most highly-paid job is now jury duty.

4. Mothers in Ethiopia are telling their kids, “finish your plate; do you know how many kids are starving in America?”

3. Motel Six won’t leave the lights on.

2. The Mafia is laying off judges.

And my most favorite indicator of all…

1. If the bank returns your check marked as “insufficient funds,” you have to call them and ask if they meant you or them.

If you have any others feel free to leave them in comments.

Not too much fun in the current situation – but this is worth it. Get in quick, though – the first two in the series have been removed, presumably due to copyright issues.

Hat tip – The Finanser.

Slightly wonky topic today, but one that is very important. Most of you out there doing financial modelling should already know this (but could do with some reminding) and those looking into this sort of modelling (and bank management who get fed these reports) should know.

For most situations the normal distribution is not the one you should be using for financial modelling.

I’ll say it again in a different way – if you are going to use the normal distribution first prove that it is the correct one to use.

I know that the Basel II Accord mandates its use (even helpfully giving the Excel function “NORMSDIST” in the footnotes) as do many other regulations but there is a mountain of analysis in the academic sphere showing that the normal distribution is not the most correct – understating the probability of the “long tail” or “black swan” events.

Lévy distributions are much more correct – there are particular examples that give much more weight to the long tail than a typical normal distribution does. Work done by Mandelbrot and Taylor (yes, Mandelbrot of the pretty fractal pictures) in the 1960s first showed this and there has been considerable work since then. Just have a wander through Google Scholar for some fascinating reading.

Why then do we keep using the normal distribution? I think that it is just a habit and that we get it drummed into us at university. There has been an enormous amount of work done on the normal distributions, so we also look to leverage off this.

My message to management, then, is this – if a risk assessment comes to you having used the normal distribution the first question you should ask is “Why have you used the normal distribution?” If the answer is something along the lines of “We always use it.” then you should ask them to go back and justify its use. If the answer is “We have been told to do so by the regulators.” then you should tell them “Fine – use it for regulatory numbers. Just give me the real numbers as well.” If the answer is “We have modelled the market and the normal distribution is the best fit after considering the other possible distributions.” then your answer should be “Fine – thanks for that.”

Today’s The Sheet notes the rumoured demise of the Australian 5 cent piece. This follows the withdrawal of the 1 and 2 cent pieces over a decade ago.

I must say I am ambivalent about this. The cost of handling this sort of trivial small change to any bank is high and very few, if any, vending machines now take it. I cannot use it to pay for parking at any meter either.

That said, I wonder when the point comes when you should start looking at rebasing the currency. Obviously, you should not wait as long as, say, Zimbabwe did, nor should it be something that is done at the drop of a hat. The fact that you can now buy only one tenth of what you could with this coin is not a good thing.

The other option, of course, is to work to maintain the value of the currency – something that governments have historically been very poor at.

I was going over an old(ish) copy of the Economist this morning and I came across an article that deserves more coverage.

The central point is easy to state – if you intend to do a spot of money laundering or tax evasion you do not need to go to somewhere sunny or somewhere in a recognised tax haven. It is more than easy enough to do in the US or the UK.


The most egregious examples of banking secrecy, money laundering and tax fraud are found not in remote alpine valleys or on sunny tropical isles but in the backyards of the world’s biggest economies…

Take Nevada, for example. Its official website touts its “limited reporting and disclosure requirements” and a speedy one-hour incorporation service. Nevada does not ask for the names of company shareholders, nor does it routinely share the little information it has with the federal government.

This makes it fairly obvious that much of the finger pointing at the usual tax havens is just to cover up the simple fact that the bigger economies are doing even less.

It is also a good warning to others working with US and UK registered corporations – just because they come from an OECD country it does not remove, or even reduce, your obligations to check that the funds you are receiving or paying are from legitimate sources.

Just a quick post advising interested people to go and have a look at what Alan has to say about possible solutions to the current problems.

In short, and unsurprisingly, he advocates more capital. I say unsurprisingly as regulators tend to see this as a solution to all ills. Personally, I would say this would have been unlikely to help as the biggest problems seemed to be in liquidity and, recently, outright fraud.

Better disclosure would also have helped – the first of the pillar 3 disclosures over the last month show the position of the Australian banking community quite well. Unfortunately, and as I have said previously, government moves to guarantee wholesale funding have made these irrlelvant. Anyway, enjoy.

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