Adam Pasierbek & Mikołaj Firlej
about business and law news !
Main topic: UK monetary system Where does the forward guidance lead? What does one do when a policy mechanism one has put in place works better than anticipated? One could either sit back and enjoy the fruits of a good policy design – or start carefully considering the next, possibly yet more difficult step. The latter option is more advisable if one finds himself to be the Governor of the Bank of England. The issue is simple enough – last August Mark Carney, then freshly appointed Governor of the Bank of England made a promise to the financial markets that he would not revise the BoE’s bank rate (rate at which it provides liquidity to other banks) unless the UK’s unemployment falls below the level of 7% (then stable at nearly 8% level). Bank rate, which since 2009 has been set at its historical low – .5%. This measure, which fitted nicely into the array of other non-standard monetary measures invented by the central bankers since the credit crunch, came to be called forward guidance, since it was designed to provide the markets with reliable insight into the future monetary policy. In the simplest terms, it was meant to assure the financial intermediaries and investors that borrowing will remain cheap, and therefore to kick-start the stalling growth. And now here we are, hardly more than half a year later, with unemployment falling to 7.1%, which wasn’t expected to happen before late 2016. We won’t try to decide whether Mr Carney is really to thank for this development, although he is most definitely in position to reverse it, if he so pleases. Even a modest increase in rates will undercut the consumer spending, since the UK’s labour force struggles with mortgage debt burden and inflation which has been eroding the purchasing power of the earnings for almost half a decade now. The UK’s monetary authorities now face two essential questions. The easier one is – unsurprisingly – not whether to shift the rate (at least not substantially) but how not to do so and still retain the policy’s credibility – after all, Mr Carney has already broken his forward guidance promise as the governor of the Bank of Canada. As has been announced last week, the guidance will evolve, with the direction of the evolution expected to accompany the inflation report, due on February 12th – personally, the author does not presume dramatic changes. A more important problem, which is yet to be answered is how to maintain the recovery when the rate will finally need to rise. Main statement: JPMorgan case Till November Department of Justice finalized a $13 billion civil settlement with JPMorgan that resolved federal and state claims arising from the bank’s risky mortgage practices that helped lead to the 2008 financial crisis. On Tuesday a settlement between JPMorgan Chase & Co. and US government was announced. In this case JPM will pay the US government about $614 million and firm also should improve mortgage lending practices. JPM has accepted responsibility and admitted that it approved thousands of insured loans that were ineligible for insurance by the Department of Housing and Urban Development (HUD), Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). Law firms insider According to Dagens Naeringsliv (DN) the largest law firm in Norway – Wikborg Rein – wants to futher expand outside Norway where growth potential is higher. Managing partner Geir H Saviggum claims that he wants to open a new office in Beijing, China. The most important offices in terms of the level of growth are the ones in London and Shanghai. In fact, it seems to be that Norway law firm could be an inspiration for Polish legal companies in the nearest future. Recently DLA Piper announced a new global leadership team. The new global co-chairs of the firm will be U.S. corporate partner Roger Meltzer who currently works as co-chair of the Americans for DLA Piper and U.K. partner Nigel Knowles who held the position of managing partner of the firm’s international business. “This is institutional evolution towards greater integration” – they said. DLA Piper is international and one of the biggest law firm in the world. The roots of this firm are in Baltimore, Chicago and San Diego where several regional law firms merge with British firm DLA. Currently the firm has more than 4,200 lawyers worldwide and had $2.4 billion in revenue in 2012, according to the American Lawyer. Stay tuned!