I recently started working at the Social and Economic Geography research group of Ghent University, in the team of professor Ben Derudder. We study financial networks in collaboration with the team of professor Sabine Dörry at the Luxembourg Institute of Socio-Economic Research.
But why am I at the department of geography instead of economics? In other words, what exactly is financial geography? I have to admit that I didn’t know until a couple of months ago.
This post is an attempt to describe what financial geography is, and what sets it apart from other fields that study finance.
“In Europe, the relative underperformance of value [stocks] versus growth has not been as sustained since the early 1980’s. In the US, according to research by O’Shaughnessy Asset Management, investors have to go back to 1926-1941 to find a comparable period of sustained relative performance.”
That’s from Inflection Point, a blog post in which Marc Rubinstein takes a long term look at the valuation of stocks and the impact of technology on markets and the economy. The article has a lot of references.
Update: Chris Meredith of O’Shaughnessy Asset Management talked about his research on Odd Lots.
You’ll see that the forms are pretty vague when it comes to point IV – Financial interests. Board members should name “Any financial interests holdings in companies/firms listed on a stock exchange”.
Some members have included equity funds and bonds under this item, although one could argue if that’s really required.
However, the declarations of interest do contain some remarkable info:
German board members Sabine Lautenschlager-Peiter and Joachim Wuermeling own co-operative shares in banks. The value of these holdings is trivial.
Ed Sibley owns some shares in Bank of Ireland. Mr. Sibley adds: “These are the remnants from a share ownership scheme from when I worked for Bank of Ireland (until 2008). They are worth less than €500, and I am in the process of getting rid of them.”
The spouse/partner of Vytautas Valvonis works at the Lithuanian branch of Dankse Bank.
Several board members (Benoît Cœuré, Tom Dechaene, Yves Mersch, Gaston Reinesch, Vitas Vasiliauskas, Claude Wampach) teach at universities (see item II – private activities). The earnings from these professorships are trivial.
Mr. Wampach owns Turkish lira denominated bonds issued by the European Investment Bank. Let’s hope he hedged the currency risk 😉
The financial interests of board members Margarita Delgado (Spain), Catherine Galea (Malta) and Andreas Ittner (Austria) contain only securities from their home countries.
Constantinos Herodotou (Cyprus), Madis Müller (Estonia) and Pierre Wunsch (Belgium) have the most diversified investment portfolios – Mr. Müller even owns a gold ETF. They should teach their colleagues about the importance of diversification!
As a follow-up on yesterday’s post, read this story about how Deutsche Bank Trust Co. Americas handled payments from Dankse Bank‘s Estonian unit.
A number of quotes will give you an idea of the priorities at the bank:
[W]hen workers sought broader scrutiny of certain clients, they got a familiar response from some higher-ups, the officer said: Shut up, focus on the transaction in front of you, file your paperwork and move on.
Although U.S. executives routinely promised regulators they’d get tough, former staffers say such efforts were often disregarded in favor of cozy relationships with overseas customers.
Throughout Deutsche Bank, compliance staff members were considered to be “one step above the janitors,” an unnamed former executive told lawyers who filed a 2016 lawsuit against the bank.
In Jacksonville, that task [i.e. know your customer] fell to an office that was understaffed and overly permissive, insiders recall.
Swedish tv station SVT has investigated suspected money laundering by Russian and Ukranian customers of Swedbank. Oligarchs used accounts at Swedbank’s Estonian branch to move money offshore. The documentary is available online in English: part 1 and part 2.
At the end of part 2, Daria Kaleniuk, executive director of the Anti-Corruption Action Center in Kiev is asked “why do you think they [i.e., the bank] let this happen?”. Ms. Kaleniuk replies “because it’s profitable!”.
In my opinion, criminals succeed in money laundering because compliance with AML regulation was (is?) not a priority for top executives.1 A lack of funding and management attention for compliance leads to a mentality of “just check the boxes, so it looks like we did what we had to do”.
Stronger enforcement, including higher fines and other sanctions, might change that situation.
[A] higher share of women on the boards of banks […] is associated with greater stability. As I have said many times, if it had been Lehman Sisters rather than Lehman Brothers, the world might well look a lot different today. – Christine Lagarde, Managing Director of the International Monetary Fund
In today’s finance & crime news:
“Swedbank AB has fired its chief executive officer, Birgitte Bonnesen, amid allegations the bank was used to launder billions of dollars in Russian money on her watch.” – Bloomberg
For your information, five of the eleven members of Swedbank’s Board of Directors are women.