TheChek News Flow

Investors are calling for restructuring of CIT

John Thain’s ride into the sunset may be lucrative. It will not be smooth. Last autumn, the chief executive CIT Group announced plans to depart — one in a series of strategic changes at the formerly troubled finance firm. The lender went bankrupt during the crisis, and while Mr Thain’s five-year tenure had not done much for the shares, he left it on steadier footing, and perhaps even the path to better fortune.

Unfortunately, since that day last October when the flurry of moves was announced, CIT shares have dropped 40 per cent (Mr Thain has said that the stock market is pricing in a recession that he does not believe is imminent). And now investors are calling for a break up of the institution. Many other financial institutions, plagued by low interest rates and increased capital requirements, have somehow managed to avoid decomposition. But a continued weak outlook at mediocre banks means the pressure will continue to build.

Mr Thain’s signature achievement, acquiring OneWest Bank in 2015, diversified CIT’s funding base. It also took the group over the $50bn asset threshold. That is the level at which the Fed has to approve buyback and dividend plans. “Systemically important” status has forced General Electric and MetLife to break apart. (AIG is fending off a disaggregation endorsed Carl Icahn).

For its part, CIT is looking to dump its aircraft leasing unit ($10bn in assets) whose capital charges do not justify its profitability.

Still, plenty of investors believe broader cuts, including a sale of its railcar finance business, are needed. Interest rates appear unlikely to rise again soon and worries about energy loans do persist. Banks, looking to put the crisis behind them, may just remain stuck in an abyss. CIT trades at just over half its book value. As such, separating the pieces looks tempting as an easy way to juice shares. This thorny problem is no longer Mr Thain’s. He departs next month.

Algorithmic and high-frequency traders will be captured by an accountability regime as part of a push by the UK financial watchdog to extend rules across wholesale markets.

The Financial Conduct Authority said on Tuesday that traders working across wholesale markets at banks and building societies would now be part of the watchdog’s certification regime, which requires lenders to assess and then certify whether individuals are suitable for particular rules. They must then update annually these assessments.

The watchdog already put traders on notice in July that it wanted to extend the rules to capture them. Companies have until September to identify additional employees that will need to be assessed.

Algorithmic trading — and a form of it known as high-frequency trading, which gained in notoriety after publication of the book Flash Boys — has gained the attention of regulators as it has become a bigger part of banks’ dealing strategies. High-frequency trading is believed to have been a contributory factor in a crash of US equities in 2010.

The new certification regime replaces the old authorisation system where the regulator would preapprove individuals working in certain roles. It came under fire for not being fit for purpose from a parliamentary commission set up in the wake of the financial crisis.

The new rules capture a far larger swath of jobs but place the onus on employers to check their staff rather than the regulator. Senior managers will still need prior approval from the FCA, however.

The certification overhaul sits in tandem with the Senior Managers Regime, which is intended to improve accountability from the top down after a string of City scandals such as the manipulation of Libor and foreign-exchange benchmarks. It holds bosses to account for failings on their watch and comes into force next month.

Those scandals underscored the limits of the so-called regulatory perimeter, where certain activities were not overseen by the FCA.

“We are determined to embed a culture of personal responsibility within the banking sector. Clear individual accountability should focus minds, drive up standards, and make firms easier to run and to supervise,” said Tracey McDermott, acting chief executive of the FCA. “And if things go wrong, it will allow senior managers to be held to account for misconduct that falls within their area of responsibility.”

The most contentious part of the Senior Managers Regime — a “guilty until proven innocent” provision — was excised at the last minute by the Treasury. But instead the government said it would extend the regime across all financial services firms, including the buyside and consumer-credit companies and mortgage brokers; roughly an additional 60,000 firms.

A parallel set of rules dictating conduct will come into force next year. They cover a far broader population of City employees — including junior staff — than those captured by the certification regime, estimated at around 1m people.

MADRID, Feb 4 (Reuters) - Mexican billionaire Carlos Slim is set to launch a full takeover bid for Spanish building and infrastructures firm FCC FCC.MC after a planned rights issue due to soon be approved, a source familiar with the matter said.

Slim will not necessarily gain full ownership of the company because most shareholders are expected to buy into the rights issue - priced at 6 euros - while the subsequent bid, expected to be formulated at around 7 euros, may attract interest only from investors who bought shares below that level.

The source said the only obstacle for the move to take place was a shareholders pact that Slim signed with the daughter of the firm's founder that prevented any of the two from holding more than 29.99 percent of the capital.

The source said, however, that the pact would be revised ahead of the rights issue to pave the way for the operation.

"The relationship between the two shareholders is extremely fluid and the pact will undoubtedly be modified," said the source on condition of anonymity.

A spokesman for FCC and Carlos Slim's Grupo Carso GCARSOA1.MX declined to comment. It was not possible to contact any spokesperson for Esther Koplowitz.