European Credit Management rebuilds after profits halve

European Credit Management, the fixed-income boutique founded a decade ago by two debt bankers at Merrill Lynch, is rebuilding following a couple of years of underperformance and mandate losses.

Last week, the firm recruited Andre Mazzella, formerly a portfolio manager on the credit team at hedge fund CQS, to become lead portfolio manager for high-yield bonds. Several further hires are planned.

The additions follow a period of recovery at ECM’s funds, which suffered from poor returns and volatility during the credit crisis. The firm was acquired by US bank Wachovia in January 2007, towards the end of the credit boom. Wachovia, which suffered its own woes in the crunch, was subsumed into Wells Fargo in January 2009.

ECM’s accounts for the 12 months to December 31, 2009, recently filed at Companies House, show operating profits halved that year to £11.4m, compared with the year before.

The fall was mostly due to a 28% drop in management fees, but there was also a 90% fall in performance fees, to £80m. ECM’s assets under management have fallen from a peak of just over €20bn in late 2007, to €12.1bn as of June 30 this year, according to its website.

One investor in the firm’s ECL fund, one of its seven main products, reported returns of -3.7% during the three years to June 30, against an 8.3% rise in the Barclays Sterling Over 15 Year Gilts index.

But during the 12-month period to the same date, the investment performed better, returning 40% to the benchmark’s 8%. That is indicative of a wider recovery in performance in recent months, according to the firm.

According to the investor, ECM has reduced leverage in many portfolios and this may lead to lower, but steadier, returns in future.

Rating agency Fitch Ratings, which scores investment funds and managers, said in February it would maintain its M2+ rating on ECM, its second-highest. Fitch’s analysts said ECM had been “adversely affected by the global financial crisis, but proved resilient”.

They added it now has “a lower business risk profile following the completion of a fund deleveraging programme and the establishment of a positive relationship with its new indirect owner, Wells Fargo”.

ECM was founded in 1999 by Steven Blakey and Stephen Zinser to take advantage of an expected surge in European credit markets following the advent of the euro. Blakey was head of international credit at Merrill Lynch, while Zinser was responsible for overseeing new issues of credit and asset-backed securities at the bank.

European Credit Transfer and Accumulation System (ECTS)

ECTS makes teaching and learning in higher education more transparent across Europe and facilitates the recognition of all studies. The system allows for the transfer of learning experiences between different institutions, greater student mobility and more flexible routes to gain degrees. It also aids curriculum design and quality assurance.

Institutions which apply ECTS publish their course catalogues on the web, including detailed descriptions of study programmes, units of learning, university regulations and student services.

Course descriptions contain ‘learning outcomes’ (i.e. what students are expected to know, understand and be able to do) and workload (i.e. the time students typically need to achieve these outcomes). Each learning outcome is expressed in terms of credits, with a student workload ranging from 1 500 to 1 800 hours for an academic year, and one credit generally corresponds to 25-30 hours of work.

A series of ECTS key documents help with credit transfer and accumulation – course catalogues, learning agreements, transcript of records and Diploma Supplements (DS).

Although ECTS can help recognition of a student’s studies between different institutions and national education systems, higher education providers are autonomous institutions. The final decisions are the responsibility of the relevant authorities: professors involved in student exchanges, university admission officers, recognition advisory centres (ENIC-NARIC), ministry officials or employers.

The European Commission has established a network of Recognition experts (ECTS/DS) and developed the ECTS and DS labels to recognise excellent application of either system.

ECTS is closely related to other efforts to modernise higher education in Europe. In particular, it has become a central tool in the Bologna Process which aims to make national systems converge.

ECTS Users Guide

The ECTS Users' Guide provides guidelines for implementation of ECTS. It also presents the ECTS key documents. The Guide is offered to assist learners, academic and administrative staff in higher education institutions as well as other interested parties. It has been updated in 2009 to take account of developments in the Bologna Process, the growing importance of lifelong learning, the formulation of qualifications frameworks and the increasing use of learning outcomes. It has been written with the help of experts from stakeholders’ associations and ECTS counsellors, and submitted for consultation to stakeholders’ associations, Member States’ experts and the Bologna Follow-up Group. The European Commission has coordinated the drafting and consultation process and is responsible for the final wording of the Guide.

Translations:
(DISCLAIMER - translations provided by national agencies, in case of contest only the English version is the valid version)

Hard copies of the ECTS Users Guide can be ordered at the EU Bookshop.

The basic principles of ECTS are summarised in the ECTS Key Features .

Standard forms of the ECTS Users' Guide

• Erasmus Student Application Form (word format)
  

• Erasmus Learning Agreement (word format)
  

• Erasmus Training Agreement (word format)
  

Erasmus Transcript of Records (word format)

European Credit Transfer System (ECTS)

Boğaziçi University uses a credit-hour system which is similar to most north American universities. A 3-credit course means three hours of weekly lectures or two hours of lectures and two hours of laboratory work every week.
European Credit Transfer System (ECTS) is a similar system that is used in Europe so that exchange students can transfer their credits to their home institutions.
Boğaziçi University has ECTS equivalents of all its courses.

New Solution for European Credit Card Problem

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Been to Europe lately? Then you've probably come home saying something along these lines: "My credit card didn't work at the gas station/metro/bus depot!" That's because Europe has largely switched from magnetic strip cards used here in the U.S. to what's called a "chip-and-pin card." Bottom line for Americans: Chip-and-pin card readers—most importantly, those used in self-service kiosks at the aforementioned gas stations and metro stations—don't read our U.S. cards, rendering them useless in many situations.
It's a major problem for U.S. travelers, and since a wholesale switch here in the States would be prohibitively expensive for the banks, the only feasible solution is a stored-value card travelers can load with money before they depart. Thankfully, Travelex just announced the first such card, a stored-value dual-mode chip-and pin card for American travelers to Europe. It’s available in euros and pounds, and it also has a magnetic stripe for places that still use that system.

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The good news is that Americans can finally carry a card that lets them use automated machines that don’t accept cash and no longer accept American stripe cards. The bad news is that the exchange rate to buy it is not good. At press time, $1 = €0.718 on the card, but $1 = €0.748 on the open market. The discrepancy is similar for pounds: $1 = £0.609 on the card, but $1 = £0.633 on the open market. Considering you're likely putting several hundred or thousand dollars on the card, these rates cost customers significant cash.
Another drawback: So far, you can buy it only at retail outlets. You can find the outlets on the Travelex website.
Maybe this move will finally get the big banks and card issuers to get off their butts and start issuing dual-mode credit cards. I'll have more details in a column in the coming weeks.
Readers, would you buy a stored-value chip-and-pin card before your next trip to Europe?

Credit Suisse cuts RoE target, misses Q4 forecast

(Reuters) - Credit Suisse cut its profitability target and dividend, blaming tighter capital regulations, after it missed fourth-quarter profit forecasts on disappointing fixed-income trading.
The Swiss bank has cut its return on equity target -- a measure of profitability -- to "above 15 percent" from "above 18 percent," Chief Executive Brady Dougan said on Thursday.
The bank had 14.4 percent RoE in 2010.
Credit Suisse shares, which had risen 19 percent this year, making it the best-performing stock in the Swiss Market Index, were down 5.7 percent at 12:16 p.m. British time, underperforming a 2.0 percent fall in the European STOXX banking index.
"That is really a reflection of the new environment. We clearly have more capital being required for all banks," Dougan told Reuters Insider television.
"We think actually achieving more than 15 percent RoE over the next three to five years will be a best in class."
Other big banks could have to follow Credit Suisse in paring RoE targets due to new international rules that will force them to hold more capital in response to the financial crisis. But Swiss banks face even tougher capital requirements than rivals because of planned strict domestic regulations.
"The new targets seem to recognise the new reality of the harsher operating environment for their business.... They seem to have taken the route of lowering their targets rather than being better," said Helvea analyst Peter Thorne.
Switzerland's second-largest bank, Credit Suisse also cut its dividend to 1.30 francs from 2 francs in 2009, but said it expected to grow its dividend gradually as it builds capital.
Bigger domestic rival UBS, which has pledged not pay a dividend for some time as it retains earnings to build capital, said on Tuesday that the local regulations put Swiss banks at a disadvantage to peers abroad.
Credit Suisse won market share from UBS, saved from collapse by the Swiss state in 2008 after it ran up massive losses in the financial crisis, but it is now struggling to maintain its advantage as its arch rival finds its feet again.
While Credit Suisse and UBS have already cut back further on capital-sapping activities than most due to expected tougher Swiss rules, UBS's tier 1 ratio, a measure of capital strength, moved ahead of Credit Suisse's in the fourth quarter.
"This story comes down to capital. UBS has a capital surplus, and the comparison does not favour Credit Suisse," said Evolution Securities banking analyst Piers Brown.
Investment banking pretax income rose to 558 million Swiss francs ($579.8 million) from a lacklustre 395 million the previous quarter, but analysts said fixed-income, currency and commodities (FICC) trading disappointed compared to peers.
"FICC sales & trading was down 39 percent quarter on quarter, a larger drop than we had expected, given what we have seen so far from Deutsche Bank and UBS," said Andrew Lim from Matrix.
Dougan hired investment bankers aggressively early in 2010 just as markets flattened. His bold strategy initially backfired as trading revenues wilted in the third quarter, though Credit Suisse should benefit from any upturn in trading longer term.
While Credit Suisse's stress on client trading reduces the bank's risk-taking with its own assets, the bank said profits would still be subject to fluctuation and that the market outlook for the rates business remained subdued.
"There will be some quarters and some years that will be more active in terms of client flows and others that will be less active. Our business will certainly be dependent on those flows," Dougan told a press conference.
MARGIN PRESSURE
Credit Suisse attracted 9.6 billion of net new client money to its wealth management arm, down from 12.6 billion the previous quarter and slightly undershooting average analyst expectations for 10 billion.
The bank had benefited from clients leaving UBS in droves after massive writedowns on toxic assets, but UBS shares rallied on Tuesday as it stemmed outflows and said it expected to win more client money in 2011.
"The CS star did not shine so long. UBS has already done better than CS. The second-biggest bank is the second-best bank again. That is also a psychological problem," said one trader.
Credit Suisse echoed comments made by UBS that it attracted strong inflows from the ultra wealthy and emerging markets.
Credit Suisse reiterated a target for a net asset growth rate above 6 percent, but the bank said it had cut its pre-tax margin target for private banking and asset management to "above 35 percent" from 40 percent after flaccid client activity weighed on profitability last year.
Credit Suisse said its quarterly net profit was hit by 146 million of fair value charges on its own debt due to the tightening of credit spreads, as well as fair value losses on cross currency swaps relating to its own long-term debt.

New European tools for training quality and credit transfer reach practitioners

On 17 and 18 November Cedefop and the European Commission’s Directorate-General for Education and Culture will be holding a launching conference for two new European tools: the European Quality Assurance Reference Framework (EQARF) and the European Credit System for Vocational Education and Training (ECVET) in Brussels, with the participation of over 300 representatives of training providers and other bodies and institutions from across Europe.

The aim of the conference is to bring together all stakeholders and  explain what is at stake, show them what has been achieved so far, and inspire and invite them to help shape the process.
The recommendations of the European Parliament and of the Council on EQARF and ECVET, adopted on 18 June 2009, provide solutions to several issues related to coordination between EU Member States in vocational  education and training (the Copenhagen process): the  mobility of learners in Europe,  quality in vocational education and training (VET) provision and management, and helping learners  create their own pathways to qualification.  

Cindy Baker sentenced to 10 years, 6 suspended

BERRYVILLE -- Attorney Cindy Baker will be stripped of her law license and sent to a drug rehabilitation facility after pleading guilty to meth-related felony charges Wednesday.
She received a 10-year sentence, with six years suspended, a judicial transfer to the Department of Community Correction where drug rehab is available, and 14 years of supervised probation.
The 37-year-old Berryville attorney made headlines several years ago when the courthouse was evacuated after she introduced what was believed to be a bomb during trial.
Her name surfaced in the news again when she was charged with contempt of court by both Green Forest and Berryville district judges, who claimed she had misrepresented her ability to appear in their courts.
Baker was set for a jury trial earlier in this month to face several felony charges stemming from her arrest more than a year ago when investigators arrived at her Berryville home and law office with a search warrant. Meth, drug paraphernalia and weapons were seized.
She was suspected of selling meth to a confidential informant on more than one occasion.
During Wednesday's negotiated plea agreement, Baker admitted she was in possession of meth when investigators arrived.
She was represented by Little Rock Attorney Jeff Rosenzweig, who outlined the conditions of the negotiated plea agreement.
She is to surrender to the Carroll County Sheriff's Office by noon Jan. 4 following medical tests that are scheduled to take place in Springfield, Mo., on Jan. 3.
She will be allowed to reside in Missouri, where she is currently living, once her incarceration is complete, and will be allowed to comply with her terms of probation/parole there.
In addition, Rosenzweig wanted to make it clear that his client was in need of various prescription drugs and asked for assurance that those drugs would be properly administered while she was incarcerated.
He also asked for credit for the 72 hours of time served.
H.G. Foster, special prosecutor for the state, said he agreed to the negotiations and the results because it was the appropriate resolution. He said the Carroll County Sheriff's Office had done an excellent job and had an excellent case -- but based upon his examination of the issues, this resolution was the best.
Special Judge Gary Arnold agreed, saying it was an appropriate sentence.
He made sure Baker was aware that under the terms of the sentence, she could "go to the pen up to 14 years."
He spoke to her directly, saying she was the "perfect example" of what meth can do, saying it does not respect anyone, anywhere, and she had made bad choices.
Arnold said he hoped she would consider her "obligation and opportunity" to correct the problem and to make a big difference in the lives of others dealing with the evils of meth.
"I encourage you to do that," he said. "First take care of yourself, then help others."
Investigator J. J. Reddick, with the CCSO, said he was satisfied with the outcome, although law enforcement officials always want the guilty to serve the maximum time.
"As long as she gets help -- that's what it's all about," he said. "I feel good because our case was solid."
Prosecutor Foster agreed, saying, "It's her best shot at keeping a needle out of her arm and messing up again."