FINANCE

Coco bonds have not lived up to their promise

DURING the financial crisis, Western governments poured hundreds of billions of dollars into their banks to avert collapse. The search for ways to avoid future bail-outs started before the turmoil ended. One of the niftiest proposals was the “contingent convertible” (coco) bond, which turns into equity when the ratio of a bank’s equity to risk-weighted assets falls below a predetermined danger point (since set at a minimum of 5.125% for cocos, although it can be up to around 7%). The ambition was grand. As the Squam Lake Group, composed of mostly American academics, put it in 2009, the automatic conversion of cocos would “transform an undercapitalised or insolvent bank into a well-capitalised bank at no cost to taxpayers”. At first, regulators were keen. In 2010 Mervyn King, then the gover...

Hong Kong defends its dollar peg in both directions

THE Hong Kong dollar is one of the most and least manipulated monies in the world. For over 34 years the territory’s monetary authority, the HKMA, has kept it pegged to America’s currency at around HK$7.80 to the dollar, resisting all temptations to let it fall or rise. In 2005 it refined the peg with two promises: to buy dollars at the price of HK$7.75 and to sell them for HK$7.85. Get our daily newsletter Upgrade your inbox and get our Daily Dispatch and Editor’s Picks. The strength of the Hong Kong dollar has obliged the HKMA to keep the first promise many times since. Its purchases of American dollars have even drawn the accusation that it manipulates its currency for competitive advantage. In fact, the HKMA has always been ready to manipulate its currency upwards, too. But since...

Indicators that signal financial-market trouble are flashing

WATCHING financial markets can be like watching a horror film. A character walks into the darkness alone. A floorboard creaks. The latest spooky sign is the spread between the three-month dollar London interbank offered rate (LIBOR) and the overnight index swap (OIS) rate. It usually hovers at around 0.1%, but has recently climbed to 0.6% (see chart). As it widens, bankers are bracing for a jump scare. Get our daily newsletter Upgrade your inbox and get our Daily Dispatch and Editor’s Picks. To see why, consider what each rate represents. LIBOR is the rate that banks charge other banks for unsecured loans. The OIS rate measures expectations for the federal funds rate, which is set by the central bank. As LIBOR rises above the OIS rate, that suggests banks fear it is getting riskier t...

Mobile money-saving app Qapital raises $30 million to spend on growth

Qapital, one of a slew of mobile applications trying to make it easier for users to save money (and spend it more wisely), has raised $30 million in fresh financing as it expands beyond savings to offer investment advisory services. Since its launch in the U.S. in 2015, Qapital has amassed roughly 420,000 users that have saved nearly $500 million on the platform, according to the company. But Qapital is more than just a Digit -style savings tool these days. The company has also folded in Qapital Spending through a linked Visa Debit Card that works with money saved through the app — as well as a budgeting tool called Qapital Weekly Spending Target. The company now has designs on the robo-investment market through Qapital Invest, a new product that Qapital expects to roll out before the end ...

Coinbase gears up to jump through regulatory hoops with new CFO and other big hires

The Coinbase hiring spree continues. In the last week and a half, the company has picked up a new CTO, a new VP of communications, a global head of inclusion and now a new CFO. In a blog post today, the company announced the addition of Alesia Haas, who joins the team from New York-based alternative asset management firm Oz Management. Previously she held roles with Merrill Lynch and General Electric. “I’m incredibly excited to have Alesia join Coinbase as our new CFO. She brings deep financial services experience to our growing company,” Coinbase CEO Brian Armstrong said of the hire. “As a fintech company, finance is core to everything that we do. We plan to continue bringing the best and brightest from both finance and technology companies to help create an open financial system for the ...

Ripple’s Brad Garlinghouse and Michael Arrington to talk cryptocurrency at Disrupt SF

Ripple CEO Brad Garlinghouse and Arrington XRP Capital founder (and TechCrunch founder) Michael Arrington will be joining us at TechCrunch Disrupt SF in September to talk money. Garlinghouse has had a long and storied career in the tech industry, serving as a Senior Vice President at Yahoo!, President of Consumer Applications at AOL, and CEO of the file collaboration service Hightail. But in 2016, Garlinghouse was promoted from COO to CEO at payment services company Ripple. Ripple’s goal is to try to make it as easy as possible to transfer money between two stores of value. Right now, that process is incredibly tedious, with no unifying structure to send money overseas or to underbanked communities. The notion of a unifying ledger is not a new one, but it’s one that’s transformed Ripple in...

New York’s programming ed tech startup, General Assembly, sells to Adecco for $413 million

The European human resources services company Adecco Group said that is acquiring the New York-based, programming, design, and management training startup General Assembly for $413 million. With the acquisition, Adecco adds to its ability to provide job training and re-skilling services for businesses. It’s proof that General Assembly’s own business has come a long way since its early days as a startup offering continuing education or training programs for new entrants into the tech-enabled white collar workforce. General Assembly was worth $440 million after its last, $70 million investment round, according to a report in Axios, which means that early stage investors will see a nice return on their investment while many later stage backers — including Wellington Management and Fresco Capi...

Subscription biller Zuora soars 43% following IPO

Subscription biller Zuora was well-received by stock market investors on Thursday, following its public debut. After pricing its IPO at $14 and raising $154 million, the company closed at $20, valuing the company around $2 billion. It was also much higher than expected. The company said in its filings that it planned to price its shares between $9 and $11, before it raised that range to $11 to $13. Founder and CEO Tien Tzuo told TechCrunch that he believes “a bet on us is really a bet on an entire shift to a new business model, to a subscription economy.” He is optimistic that subscriptions are the “business model of the future.” Zuora sees itself as an early pioneer in a growing category. The company believes that more businesses will shift their business models to subscriptions, across s...

The outlook for US government debt

THE bond market used to be the prime exhibit for those predicting low long-term economic growth. In the summer of 2016 the ten-year Treasury yield briefly dipped below 1.5%, as expectations for growth and inflation sagged. Things have changed. Earlier this year the ten-year yield briefly went higher than 2.9%. Even after recent share-price gyrations, it remains around 2.8%, well up since the start of 2018. The rebounding interest rate partly reflects higher confidence in global growth. Inevitably, a new set of pessimists now voice a fresh worry: that bond yields might go on rising for less welcome reasons. They point to three threats. The first is monetary policy. The Federal Reserve has raised short-term interest rates by 1.5 percentage points since December 2015. At their March meeting, ...

Indian states squabble over how to share out federal cash

THE population of Uttar Pradesh is over 220m, enough to make the northern Indian state the world’s fifth-most populous country. But statistics still used by bureaucrats in New Delhi put it at less than 85m. Antiquated census data are used to split everything from federal funding to seats in the national parliament. A proposal to use up-to-date figures has created a political storm. Get our daily newsletter Upgrade your inbox and get our Daily Dispatch and Editor’s Picks. In the mid-1970s India’s southern states were doing better than northern ones at controlling population growth. That meant losing federal power and money, both doled out in proportion to population. The inelegant solution was to keep using census figures from 1971, an arrangement that became indefinite. But buried in...

Catching the bitcoin bug

SINCE the heady days of late 2017 and January of this year, crypto-currencies have gone into retreat. Bitcoin, the best-known example, is now worth just a third of its value at its peak (see chart). But there remain plenty of true believers in digital currencies. They point out that prices are still well above where they were in 2016. And interest from institutional investors is still strong enough for analysts to want to make sense of the crypto-phenomenon. Get our daily newsletter Upgrade your inbox and get our Daily Dispatch and Editor’s Picks. The latest bank to take a shot is Barclays, which devotes a lot more of its “Equity Gilt Study 2018” to the impact of technological change on finance and the economy than it does to either equities or gilts. Its report describes crypto-tech...

How developing countries weave social safety nets

SOUP kitchens serve the needy for free; restaurants serve the hungry for money. In parts of South Asia, eateries near mosques sometimes fall into a third category. They feed the poor sitting patiently outside, whenever a pious or charitable passer-by pays them to do so. Alms-giving of this kind provides one traditional safety net for the destitute in developing countries. But it is, thankfully, not the only one. Get our daily newsletter Upgrade your inbox and get our Daily Dispatch and Editor’s Picks. According to a new report by the World Bank, developing countries spend an average of 1.5% of GDP on social safety nets designed to stop people hitting rock-bottom. (The rich countries in the OECD spend on average 2.7%.) Among these are workfare schemes, pensions, free school meals and ...