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An interesting new report on “financial access” from the World Bank is well worth a read. This is the second annual edition of the research, so tracking countries’ progress on bringing financial services to more of their citizens is possible for the first time. Globally, the number of deposit accounts per capita grew by 4.3% in 2009, with the relatively underbanked regions of Latin America and sub-Saharan Africa showing the biggest increases.

The country-level data is a treasure trove of financial trivia, including the following tidbits sure to make you a hit at your next cocktail party:

  1. Which country has the most commercial bank accounts per capita? The most automated teller machines?
  2. As measured by complaints per person to financial ombudsmen, where are the most disgruntled bank customers?
  3. What do bank customers in Namibia, Norway and Hungary have in common?

1. Japan (7,172 bank accounts per 1,000 adults) and Canada (218 ATMs per 100,000 adults); 2. Portugal; 3. The most common complaint about their banks relates to poor financial advice

Conditions remain challenging for private equity firms. For funds that closed in the second quarter of 2010, US$41bn was raised, down from US$92bn in the same quarter last year and US$195bn in the second quarter for 2008, according to Preqin, a research firm. And as this blog has addressed before, the effort required to raise even these more modest sums is rising; the average time it takes to close a fund now stands at nearly 20 months.

“Subject to normal catastrophe experience.” Only in a report about reinsurance could this appear as an ordinary disclaimer.

The latest outlook for the global reinsurance industry from Fitch is cautiously optimistic (the ratings agency upgraded the sector’s outlook from “negative” to “stable” late last year). Still, the industry’s “relative resilience and outperformance during the course of the financial crisis have come at a cost,” the agency says. Plentiful capital and spare capacity are putting pressure on premium rates, with prices during the January renewal season falling by 5-10%, on average.

What’s more, insured “catastrophe events” in the first half of 2010 surged to US$22bn, double the average for the six-month period in the previous decade, with the earthquake in Chile and ongoing fallout from the Deepwater Horizon oil spill in the Gulf of Mexico the main culprits. Further above-average losses will, as Fitch warns, cloud an otherwise sanguine outlook for reinsurers.

Every three years, the Bank for International Settlements surveys the global currency market. Its latest report shows that the average daily turnover in the foreign exchange market reached a whopping US$4trn in April 2010, up 20% from April 2007. The most popular currencies remain the US dollar, euro and Japanese yen, which largely maintained their overall share of trading over the past three years.

Deeper digging into the results uncovers some interesting trends in certain currency pairs. Facing moribund growth at home, investors from the largest developed economies are looking to emerging markets for returns, fuelling rapid growth in, for example, the exchange of American dollars for Brazilian reais and Chinese yuan. Another particularly fast-growing pair, the yen-Australian dollar, reflects a growing appetite for commodities. By contrast, one of the only pairs to see trading volumes fall in recent years is the august “cable”, or trade between US dollars and British pounds.

New research offers a robust defence of stricter capital requirements in the face of banking industry lobbying.

The reports, from the Financial Stability Board, the Basel Committee on Banking Supervision and the International Monetary Fund, assess the long-term economic impact of tougher capital and liquidity requirements for banks. If phased in over a four-year period, each percentage point increase in banks’ core capital ratio trims 0.04% from the annual growth rate of GDP over the phase-in period, leaving GDP 0.2% lower at the end of four-and-a-half-years than it otherwise would have been. A 25% hike in liquid asset holdings affects growth even less. “The benefits substantially exceed the potential output costs,” the groups conclude.

A similar exercise this summer by the Institute of International Finance, a banking industry association, came to a much gloomier conclusion. Under “reasonable assumptions,” it concluded that GDP in the US, Europe and Japan would be 3% lower at the end of a five-year transition period, with nearly 10m fewer jobs created as a result. A subsequent softening of the original proposals for global capital and liquidity reforms may temper the lobby’s distress, but it’s safe to say that regulators will continue to laud the benefit of stricter rules while banks will keep fretting about the costs.

For all the talk of a jobless recovery, a new report from the Association of Executive Search Consultants suggests that things are looking up for senior professionals, especially if those job seekers are in the financial services industry.

The AESC’s latest quarterly report shows that the number of executive searches launched in the second quarter rose by 7% versus the previous quarter and by 38% versus the previous year. Headhunters were particularly busy with new assignments in the financial services sector, with the number of searches surging 50% year-on-year, more than any other industry.

Any news about improving employment conditions will be welcomed, but news that the job market for senior bankers is recovering faster than others may be greeted a bit less enthusiastically, given prevailing public opinion.

New research from the New York Federal Reserve attempts to shed some light on the so-called shadow banking system, the vast network of lightly-regulated financial firms that failed spectacularly during the credit crunch. This is no easy task, as a series of headache-inducing flowcharts proves (a small excerpt from the paper’s coup de grace, on p3, is below; FT Alphaville, meanwhile, attempts to distil the paper’s findings in cartoon form). The paper itself is also somewhat mysterious, as the authors note that the first 70 pages are intended as an “executive summary” of a 230-page tome to which a full table of contents is provided but no further pages are published.

The Fed researchers define shadow banks as “financial intermediaries that conduct maturity, credit, and liquidity transformation without access to central bank liquidity or public sector credit guarantees.” At their peak, shadow banks amassed liabilities of nearly US$20trn, some US$8trn more than the traditional banking system. These intermediaries fuelled the subprime credit boom with cheap funds by converting “opaque, risky, long-term assets into money-like and seemingly riskless short-term liabilities,” the authors write. Of course, at the first signs of distress this seemingly riskless source of funds was found to be anything but.

Assets under management are up, but profits are down. These are difficult times for private banks that serve the world’s richest individuals. The cost of chasing business from high net worth (HNW) individuals is rising as they grow more cautious about entrusting their assets to private bankers.

According to the Scorpio Partnership, a wealth management consultancy, private banks managed US$16.5trn in HNW assets last year, up 17% on the year before. However, the net new money that well-heeled customers pledged to banks in 2009, only US$900m, was down a steep 60% from the previous year. Moreover, around US$10trn in “bankable” assets remain outside of banks.  Despite improved investment performance, clients remain skittish about investing their money, even if they have a lot of it.

The trader folk wisdom that says “sell in May and go away” proved particularly wise this year. In America, the Dow and S&P 500 indexes recorded their worst May performances since 1940 and 1962, respectively. The global, broad-based MSCI World index shed nearly 10% last month, its worst May performance since the index was created in 1970. A jittery start to June in many major markets suggests that the pain for investors could continue into the summer.

Europe’s subdued recovery and ongoing fiscal troubles are taking their toll on investment banks. According to a new analysis by Freeman & Co, a financial services research firm, investment banking fees in western Europe fell by 17% in the first four months of this year.

The pain in western Europe is in sharp contrast to a 53% jump in banking fees in America, an 87% rise in Japan and a whopping 161% surge in China. Banks in India and, perhaps unexpectedly, Eastern Europe also registered robust fee increases.

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