tv Street Signs CNBC September 20, 2016 4:00am-5:01am EDT
. good morning everybody. welcome. you're watching "street signs". i'm louisa bojesen. >> i'm carolin roth. bank of japan, european stocks trading cautious but slightly higher ahead of the bank of japan and the fed meetings. both of them beginning today. >> oil weighing on markets after the venezuelan energy minister claims the market is 10% over supplied. glaxosmithkline naming a new ceo. the suspect in the new york and new jersey bombings, ahmed
khan rahami is charged with attempted murder as officials tells nbc news he and members of his family have become radicalized. good morning, everybody. >> good morning. >> a lot going on. these are the two days we've been waiting for. >> absolutely. i guess today is going to be another wait and see move market day for traders. >> two more days to go before we know anything with the fed and bank of japan and it could all be down to the bank of japan this time around because we have the beginning of this two day policy meeting that's taking place. comments from a whole bunch of these high-profile politicians, they fueled expectations bank of japan is getting ready to adjust its monetary policy mix.
they made it very clear that there is more room for monetary easing. you have talk about how new ideas shouldn't be off the table. abe has been talking how abe economics has improved the climate. and you got the governor of japan as well talking about how further measures might be necessary. the issue is what type of measures could we be looking at? >> there's a whole array of expectations out there. it's all over the place. now the policymakers have come under increasing pressure due to the increasing of the yen against the dollar in recent months. there's concern that the yield curve in japan has become counter productively flat butting a strain on the country's financial sector. they do better with a steeper yield curve. in the face of these challenges the bank of japan is expected to act. economists surveyed by reuters
don't expect the boj to move on rates but the central bank is widely expected to introduce measures to steepen the yield curve. they could start operations in reverse twist by shorter and longer period government bonds. >> meanwhile on the eve of the bank of japan's latest meeting the japanese prime minister abe has been defending his countries initiative and aggressive policy before executives in new york. >> there's no doubt that abe economics has improved japan's investment climate. japan ranks number one as a base for both r and d and marketing. >> now for more on the options available to the central bank let's head straight out to
tokyo. we're all speculating what we could be hearing from the bank of japan today and then also whether or not in the end it will do anything to weaken the yen. >> reporter: well that's the key question. it's interesting you guys were talking about how expectations are all over the place. you look at the market moves. it seems like investors don't know what to think going into that decision tomorrow. nikkei is flat. yen strengthened just slightly on the expectation that the boj may disappoint and not move. then we saw yields on super long hit six month highs today on the expect jays that the boj may tweak their bond-buying. certainly we've heard from the governor leading up to this meeting trying to manage expectations and getting the messaging right. the key for them to convince the markets that they still have the tools in place to reach that 2% inflation target.
the other question is how effective that will be in weakening the yen. the bank of japan is looking to tweak the policy on three specific france. the so-called reverse twist, steepening the bond yield curve by going for longer term looking toly up shorter term jgb and cutting the rate and moving away from that two year time frame to allow for flexibility. there's serious questions here moving forward about the boj and the limits to their monetary policy. look at jgbs alone on pace here at their current rate buying up 80 trillion yen. this year they would who e7b% of outstanding jgbs and the last policy meeting they doubled up but yet reach that 2% inflation target. there's an argument for the boj
not to do anything at all and perhaps wait for the fed and put the pressure on them to hike rates first. but we had a chance to speak with the former policy board member over at the boj. she's been a harsh critic of the negative-interest-rate policy. she said if they don't move their credibility will be shot further. >> in july she expanded etf. but this assessment, it's stronger for boj to achieve 2%, boj has to show additional action. otherwise it's not consistent to raise boj's communications. >> reporter: so certainly no consensus ahead of this decision coming down tomorrow.
we actually conducted our own poll going the banks asking them what they believe the boj will do and banks including goldman sachs, barclays and deutsche bank coming back saying they don't expect the boj to do anything at all. everything is on table here. one consensus consistently in the analysts and economists we've been speaking to is the boj is slowly reaching their limit. >> thank you so much. head to cnbc to find out why bank of japan could over shadow this super wednesday. while we're in waiting mode our european equity markets are slithering sideways. they are a couple of point to the upside. we're look at flat markets as these two day meetings kick off. that's reflected on our broader markets as well. relatively lackluster in terms of big board performance. we still have quite a bit of news flow especially moves in the oil and gas sector.
the ftse, the dax holding on to their gains a half percent or so. we're look at these sectors to the upside on the sector play. food and beverages, real estate, oil and gas trading off. venezuelan oil minister talking about how the market is 10% over supplied. some technical indicators pointing to cheaper crude futures and quite a bit of skepticism about venezuela's attempt to talk up about this potential opec out put freeze that we could be looking at. obviously he's talking up his own book being he wants higher oil prices because this is an economy that's been suffering so immensely because they depend so heavily but plenty of mismanagement going on. >> it would make a big difference to venezuela. and to emerging markets like if oil prices go up it could hurt. >> heavy importers. now as we all know the bank of
japan isn't the only major central bank to watch as the fomc begins its two day policy meeting today. speaking to hank paulsen he said markets should not get so caught up with on one rate decision. >> i've watched markets for a long time. i understand why people wring their hands over this. but give me a break. we're either going to erase, nudge up a little bit as i said slightly above zero, you know, in september or december, early next year. we're in unchartered territory here and what i'm focused on is we need big structural changes in our economy. to restore our economic competitiveness. >> we're joined by jonathan bell. good morning to you. to put it in simple terms hank paulsen we're making too much of a plus of that impending rate hike. do you agree with him? >> i think we are. it's only a quarter of a point.
quite often when we talk about central banks and what they are doing such small moments. does it change people's investment decisions or spending decisions on a quarter point staying the same or even a cut makes very little difference. i think we are. that said we're going to see a quarter point hike at some point. the question is whether it's now or december. a couple of weeks ago the tendency was people saying they can do it now. since then we've had brainard being more dovish and they eased back expectation. so i expect we won't see anything. >> every time we talk about until pending hike we talk about the end of money flowing into high yield sectors. but every time this has come back time and time again we talk about the end for those sectors but then for some reason the fed doesn't hike and then these sectors are in fashion again. is now finally the end for those
sectors? >> i think we're seeing the end coming at some point. it starts with the bond market. we had this huge bold market in bonds for the last 35 years. that's driven all assets up as you had qe as well. at some point that will start reversing and happening gradually. so we have been in a bond bull market for 35 years. before that we were in a bond bear market for 40 years. i think we're on the turning point of going into the next long bond bear market. >> what would the catalyst be. the bond markets are not reflecting what we think or haven't been up to now reflecting what we think will be happening with regard to these underlying central bank moves. >> first define the difference in the bond market and bull market. the last 35 years you made 6% prime in real return in u.s. bonds. so fantastic return. we're not going to get that. we know that's gone. before that you had a period
where you were losing 1.5% in real terms. so it's a long term shift. we're already moving something that's going to be a very low return. it's all about how much life can normalize. each quarter point hike if we can get away with a quarter point hike without one employment falling, without consumer confidence falling then that's the turning point. >> up mentioned you think people were disappointed that mario draghi didn't move this last time around. i would turn it around and say we might have seen some knee jerk moves initially but people might be relieved we didn't see even more measures being put in place because we know we need to unwind them and look at the difficulty in japan and do we want to go through something similar in a different way but similar still in terms of unwinding that stimulus that's been put in place. >> that's the problem central bankers have. we get the review of the policy
in bank of japan. they will say it's been effective but can't do much more without financial policy or supply side policy. same in europe. you got negative rates. they can't do much more. with japanese central bank owning 40% of jgbs. that's why the u.s. is so key because it's one that's slowly moving the other way to correct the problems we've seen. >> jonathan, what are you buying for your clients in a world where growth and yield is so hard to come by? >> at the moment the central case is the lower carries on for a longer time. you keep your core and investments that benefit from a low discount rate. but the areas you look at are i think value equities, something that's really interesting because they have been hit over the last ten years, they underperformed. that scenario you can look at. you have to look at the prices
you're paying for high quality growth and can i get something at a lower price that gives me a reasonable return. >> your favorite geographical area to make investments in? still investing in europe? >> europe is still interesting. also i think asia is interesting too. those two. u.s. is expensive on many criteria. done so well. latin america has problems that you were talking about with commodity prices. but there's a lot of areas in asia where you're seeing growth. >> jonathan lovely to see you this morning. get in touch let us know what you think. the e-mail address is on screen right now. we're all on twitter as well either at "street signs" cnbc, tweet us directly. >> let us know whether you're fed up with the fed or what would it be for the boj.
welcome back to the show. let's get you some corporate news. kingfisher beat first half expectations delivering a 13.5% jump in under lying pre-tax profit. it said it has not seen any impact from the brexit vote but retains its more cautious outlook. shares up by 1.9%. >> glaxosmithkline has named emma walmsley as its new chief
executive. she will be replacing the ceo who announced he'll be retiring at the end of 2018. jsk will be keeping the consumer part of the business. swiss watch exports fell 8.8% in august on an annual basis. the industry has been under serious pressure amid slowing demand. swiss watch exports to hong kong dropping more than 30% in july. ouch. difficult trading conditions will continue. bayer has raised its sales targets. it said it's two best selling products had a higher annual peak sales potential than previously forecast. bayer added it expects the $66 billion acquisition to boost sales growth and margins in its
crop science business. now the russian fertilizer group has warned last month that output will need to be cut soon in order to phosphate prices to find a floor. moving from central banks to elections to phosphate. >> there's a connection between many of these stories. but just to tell you we're here at the headquarters of phosagrow. prices have fallen 25% to 30% across the year here that toledo the share price of this business dropping around 12% on the 12 month yield. but the ceo thinks things are steadily set to improve and these prices have bottomed. he also thinks the deal making that's going on in the agro
sense will be good. let's listen to what he said to me. >> consolidation of the business needs more clear environment in terms of production, easier to analyze the kind of supply and demand. so i think it is very positive. if we talk about consolidation in terms of product it's a consolidated vehicle. but more profitable, so i believe that as new company it will have some synergy and of course communication, new communication will make it much easier for them to bring more prosperity of what they want to achieve the market for all
participants. >> reporter: also referencing the potash deal that's taking place at this point and i think just that message that we get more clarity on the supply-demand balance is important because the chinese are significant producers in this marketplace and making the case that the chinese have cutback output this year, which should help to underpin or firm up prices. one other thing we talked about which i think is worth bringing to bear here, of course we just had the june parliamentary elections here and a further strengthening of the position of president putin's party united russia and in those results it was said that means the reform program will remain on track, privatizations will ultimately take place although they may have been somewhat delayed because of the weaker pricing in the market for some of those
deals. and he also had the view that the sanctions probably will not see too much movement at this point. although this s-of course, one company that's benefitted from the domestic import substitution program that's taken place. >> thank you so much. where are you? what is that? >> reporter: so i should tell you, this room is an old lecture theater. i'm actually in the academy of sciences district, very famous, of course, in the old soviet days but still very important to russian society today. and this is a theater used for chemical lectures, discussions about chemistry and in particular agricultural chemistry and fertilizers. they gave us the opportunity of
bland conference room or said we could come and do it in this splendid lecture hall so of course we chose the lecture hall which i think you'll agree makes a much better backdrop. >> yeah, definitely. taking me back to my chemistry days. >> takes you back to the old school days doesn't it. i must admit when i walked in i felt anxious that i was going to have a question thrown at me by some angry teacher who might then use chalk as a missile if i wasn't paying attention. >> i've been googling phosphate. i've forgotten all of it. every single ounce of chemistry. >> i feel much more comfortable here than sitting in a chemistry room. jeff, thank you so much for that. the postal savings bank of china is due to price up the lower end of its range in what's said to be the biggest ipo since
the listing of alibaba. around three quarters of shares will go to only six anchor investors once the lender joins the hong kong market. the lender is hoping to raise between 7 and 8 billion dollars. >> oil prices are trading lower. according to venezuelan's oil minister. >> saudi arabia is pumping at record levels the world's biggest exporter produced 10.6 billion barrels a day rising about 120,000 from june and hitting a fresh high. however according to reuters kingdom's output has dropped slightly. >> algeria's minister said opec meeting might be happening before november. this ahead of an informal meeting next week where oil producers are set to discuss freezing out puts.
limiting production would be beneficial to balance the markets for at least six months. now teresa may met with the top brass at goldman sachs, pmi and amazon to reassure britain is still open for business despite the brexit vote. she emphasized the reprocity of business relationships. may is due to deliver her speech at the u.n. general assembly later on today. swiss and european commission officials say they are closer to agreeing on an immigration deal that will allow switzerland to maintain its access to the eu single market. they would be okay with a swiss proposal to giving hiring proposals to local people following a bheegt the swiss president added that everything is going in the right direction and that he's more optimistic
than he was in recent weeks. officials have scheduled further talks next month. actually i was quite surprised by this because the commission always said hey there's not any cherry picking. if you want to curb immigration that means you have to give up some of your access to the single market. now that the swiss might be able to just give preference to local people i think that's cherry picking isn't it? >> it definitely is. i have to agree with you. they have this referendum demanding immigration quotas. they are definitely changing initial thinking a bit from this complete free movement of people to as you say just making some very slight changes. i still think it's completely wrong to compare switzerland to the uk as many are doing with regards to potential of a brexit. >> this would set a very important precedent. if switzerland is allowed to do some cherry picking then maybe
britain will feel more comfortable in their negotiation. maybe they can get a similarly good deal. >> the european union commission is shaking in their pants we can't give in to switzerland too easily. they haven't given any indication they will give in. if they do they know what's coming. >> actually there was a concern going into these negotiations between switzerland and the eu that because of brerkt the swiss negotiations would be put on the back burner and they wouldn't be touched for the next four or five years. at least this step for the swiss delegation is quite positive. >> hugely. still when you look at switzerland's role in the eu, compared to the uk it's apples and bananas. switzerland 8 million people. britain 65 million or the uk. >> it's principle. >> britain is one of the largest economies in the eu. they have major waiting and anything that takes place with regard to political decision,
switzerland is like number 16 in terms of economic size. >> massive financial sector, massive machinery, massive chemical sector. >> yeah. but i still think completely different repositions also in terms of trade. so important for switzerland. they are in between italy, germany, france. >> we're told to move on. we can take this off line. >> we should. world markets off line. live blog runs throughout the entire european trading day. head there. while we're off line we'll continue the conversation. we'll see you right again after the break. narrator: so grab your loved ones monkey: don't even. narrator: and explore a world of possibilities. kubo: it's beautiful. narrator: visit discovertheforest.org to find the closest forest or park to you. everyone thought i was crazy to open a hotel here. everyone said it's so hard to be a musician, but i can't imagine doing anything else. now that the train makes it easier to get here,
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beginning today. >> oil weighing on markets after the venezuelan energy minister claims the market is 10% oversupplied. >> jsk namg n krck naming a new. and suspect in the new york and new jersey bombings, ahmed khan rahami is charged with attempted murder as u.s. intelligence officials tell nbc news that he and members of his family have become radicalized. good morning, everyone. if you're just tuning in let me give you a peek of what u.s. futures look like. a little bit mixed. s&p 500 up by 4.5 points. u.s. stocks giving up their gains in yesterday's trading session. the dow actually saw minimal moves off three points. s&p was flat as a pancake and
nasdaq was off 10 points. once again we're treading water ahead of the fed and boj and that's a picture for this. dollar/yen has been moving lower. that's in part because some traders out there are questioning the fire power of the boj and that's why we're seeing yen strengthening. we're seeing cable at 1.3006 and dollar unchanged at 1.1192. nothing until we get the boj and fed announcement. european equity markets very similar picture. mixed. the dax eking out a modest gain. jsk moving a little bit to the down side. some trepidation over to announcement of the new ceo. we saw some negativity at the start of the trading session because of the move lower in oil prices but that has moved a little bit. oil and gas is one of the
biggest sector decliners. in terms of asian equity markets japan is back online. holiday shortened week and we're seeing it down bio.2%. shanghai comp off coming back from the long holiday. and we still don't know the actual cause for that glitch in yesterday's trading session. well the bank of japan as we've been talking about started its two day policy meeting to review and revise its monetary easing measures. we go to tokyo. we're all speculating what we'll be getting. >> reporter: well, the boj is expected to adjust the framework for its ultraloose monetary policy during this meeting which it has continued to pursue since april 2013. the initial goal was to realize 2% hike in consumer prices within two years. but three and a half years later
prices are still struggling to gain ground. strong deflation engineer sentiment persists. and central bank will look into scrapping the two year time frame for achieving 2% inflation. the decision will help ease pressure from the markets to expand easing program at the end of each meeting and some say and the boj says the bank should pledge to maintain a continuous easing policy. but prolonged easing measures will challenge the central bank in finding ways to ease the side effects of the boj waded into unchartered waters. that drove long term yields even lower at which the boj governor admits could have negative effect on the economy. now to mitigate risks the bank may zito take flexible approach to its bond purchasing proposal and one proposal is to cut japanese government bonds when
need prevent yields on super long government debt falling too far. the central bank has indicated it's willing to move towards additional easing including deeper negative interest rates. the market watchers are split on whether the boj will take action this time but in any case action is limited for the boj and moments of the yen among other factors will be key in deciding when to make its move. that's all from the nikkei. back to you. the executive director at cibc capital markets just joined us around the desk. what are we expecting? >> i wouldn't expect a bazooka but tinkering around the edges. i suspect the boj will be looking at an additional easing in terms of interest rates. taking those interest rates down, probably 20 basis points.
clearly the boj are mindful and has an effect on the banking system. if they can alleviate some of that that might influence the market. >> is there anything out there to get the inflation level back to 2%? >> in the short term the options for the bank of japan to get inflation back to 2% target are limited. obviously they already tried to cheapen up the yen but that's proved to run into exalternatival resistance. we've seen the yen coming back from that 1.20 area. that's limited the ability to import inflation. in a sense now exalternatival factors coming in to play. bank of japan decision coming on the same day as the decision of the fed. absent some external factors it's difficult for japan to get that 2% inflation target in isolation over the next two
years. >> 2014 to '15 we went from 100 to 125, '15 to '16 back down 100. do you think it will work in terms of them cheapening the yen? >> it will be remarkably difficult. in a sense what happens tomorrow is just as important from the u.s. side of the equation as it is from the japanese one. in a sense you need look at the two central banks together in order to get a reaction function in terms of where the dollar/yen is going. we won't see those levels of 1.10 or beyond in the for seeable future. if we see a rate hike tomorrow which is a low probability but not outside of all probabilities you're not necessarily going to get enough momentum to provide a new dollar bull run which will get $yen above 1.06. it's a case of a modest top side volatility. the bank would like to get back
towards inflation target. >> what happens if they do disappoint, if they don't come through with the measures that we're anticipating. a lot of people are saying they won't do anything on rates. they could speculate. it will be other. >> we've had a number of bank of japan surprises and disappointments going back over the last 18 months or even two years if we scroll back to the halloween rate surprise in 2014, for example. subsequent to that we've seen a number of policy disappointments. we saw that move into negative interest rates in january which was a way to get dollar/yen high per that rally was short-lived because negative interest rates were limited to a number of a small accounts and not widespread. in a sense you look at external factors and risk dynamics which proved to compromise. the bank of japan has been caught in a little bit of an exalternatival bind. yes if they were to disappoint this time around the risk is dollar/yen will be testing down
to that hundred threshold which is a big cycle. markets and traders like bigger cycles to test. >> how frustrating is it for traders to see their market right now whether dollar/yen. we've seen a lot of activity in pound/sterling. what's the feeling? >> we've seen volatility in a number of pairs to be compromised. here we are now in the second half of september and yet in financial markets it still feels like it's the middle of summer. in a sense you're trying identify whether it's a case of volatility and liquidity has died permanently or just a temporary event in terms of waiting until the central bank decision particularly in the fed and boj are out of the way this week. of course we're getting towards japanese fiscal half year end, quarter end, so whole range of influences up coming. so potentially there's some volatility and action to come but the proximity of the central
bank decision is meant in most pairs volatility and liquidity is dried up significantly. >> holiday yesterday -- >> and the equinox after the boj on thursday. that aedes to the difficulties in terms of trading dollar/yen in particular. >> what's your favorite cross at the moment? there are other choices as well. we don't have to tinker about the yen to use your expression. >> the cac is interesting we've seen the dollar currency like dollar and australia talking down their currency without a great deal of success. we may find policy speakers today may will be starting to balk on this particular process. i think that's one to keep in mind. from a sterling perspective you have to be playing sterling from the short side. cablecoming understand pressure and that's going to be another story which will continue into that bank of england decision in
november. >> is it a celebration. >> just a crossing of the seasons. >> they still have a market. >> they do in japan. any number of reasons. >> fantastic. >> i think a day of recreation in sports. >> marine day. any number of interesting holidays in japan. >> wish we had that. we just have boring bank holidays. not boring. >> jeremy, thank you very much. executive director at cibc capital markets. now the suspect in the new york and new jersey bombings is in custody and being treated for gunshot wounds after a shoot out with police yesterday. ahmed khan rahami a 28-year-old naturalized u.s. citizen born in afghanistan has been charged with five counts of attempted
murder. >> u.s. presidential candidates exchanged jabs. hillary clinton accused republican rival donald trump of helping islamist state militants saying they used his rhetoric as a recruiting tool. clinton called the attacks a serious challenge but urged americans to remain calm. >> this threat is real but so is our resolve. americans will not cower, we will prevail. we'll defend our country and we will defeat the evil twisted ideology of the terrorists. i'm the only candidate in this race who has been part of the hard decisions to take terrorists off the battlefield. and i've laid out a comprehensive plan to meet the evolving nature of this threat and take the fight to servesry whe -- to isis every where they threaten us. >> donald trump complained the suspect will receive medical attention and legal representation calling it sad. speaking at a rally in the
florida the u.s. republican presidential candidate struck a different tone than clinton blaming poor immigrant screening for the recent attacks. >> these attacks and many others were made possible because of our extremely open immigration system which fails to properly vet and screen the individuals or families coming into our country. got to be careful. attack after attack, from 9/11 to san bernardino we have seen how failures to screen who is entering the united states puts all of our citizens, everyone in this room at danger. so let me state very, very clearly. immigration security is national security >> meanwhile donald trump jr. has come under fire for comparing syrian refugees to
poison skittles. the republican nominee's son posted a twitter read field goal i had a buffalo skittles and told you just three would kill you would you take a handful? that's our syrian refugee problem. tweet quickly prompted outrage online while in a statement to nbc news skittle said skittles are candy, refugees are people. we don't feel it's an appropriate analogy. let's get out to tracie potts from nbc news. i could not believe skittles was trending when i woke up. not the first time skittles is getting that unwanted attention. >> reporter: not first time that donald trump jr. has now said something that's gained some traction on the campaign trail as his father tries to catch up with hillary clinton in the polls. some polls showing him slightly ahead, some polls showing her still with a thin margin. so this is a very competitive race. now one where both sides are talking a lot more about immigration in the wake of these bombings that happened over the
weekend. donald trump saying, again, people who come from countries where we know there are terrorists temporarily we should not let them in at all. when we do we should ask them what they believe and that's where hillary clinton drawshe line is that religion test. back to you. >> bush sr., ex-president, republican, turns out that it seems he's going to be voting for hillary. >> reporter: well, that's according to a report that it looks like he may be. obviously that would be huge because, you know, he's sort of a father of the republican party right now but the bushes have made no bones about it they don't like donald trump. >> thank you very much. tracie potts joining us via nbc news. now cnbc will be speaking to the former president bill clinton later today. tune in from the clinton global initiative at 1800 cet. >> some breaking news, saudi airlines jet has end isolated at
manila airport. the pilot advised the airport that the plane was quote under threat. that's according to the control tower and that's been reported by reuters. philippine civil aviation chief confirming that saudi arabiian airlines plane isolated at manila airport. reason is not clear. coming up as well we'll be speaking to an anti-money laundering expert how top financial institutions are tackling financial crime. more to come here on "street signs".
the eurozone. he blamed the sluggish eurozone recovery on bank debts calling on regular argue lators to take a harder stance. cnbc martin song sat down with the chairman and asked if negative rates are helping the european economy. >> know the central bank of the ecb has helped quite a lot. i don't believe we should be in the situation we have today without them. they have done a great job. so it does help and it helps us funding the economy and we're ready to fund the economy. on the opposite, of course it does create a difficulty when you do, especially when transformation makes less income. >> the country which started the experiment, of course, japan, there are a lot of people who don't think that's what the boj should be doing.
are you one of them? >> i think it can help, but it's not proven yet it helps a lot. i've spoken more about macro economic, the policy of the ecb, the whole policy of quantitative easing. on negative interest rates we have to be careful we don't go too far. it hasn't been proven it works yet efficiently. we need to monitor this carefully and its impacts. we need to be careful about it. my main concern is the risk -- >> he's deeply sorry taking full responsibility for the alleged misselling of unauthorized bank accounts when he was the on capitol hill later today. that's according to comments obtained by the "new york times" reportedly prepared ahead of his
questioning by the senate banking committee. the scandal has led to the firing of 5300 employees. wells fargo reached $185 million settlement earlier this month. justin past hour morgan stanley raised wells fargo from overweight to equal weight. one in five banks received enforcement regulations. tackling crime is now vital to major international financial institutions, at the uk banking trade association the bba are estimating firms are spending between several hundred pounds to a billion pounds annually on financial crime compliance. the managing director of global investigations and compliance practice and joins us. good morning. so which angle your coming from? what exactly is it that you're
looking at and how are your dealing with this massive issue that a lot of these institutions are facing. >> we assist a lot of global financial institutions, banks and other kinds of financial institutions with grappling with the challenges of complying with the regulations dealing with financial crime, terrorist financing and money laundering. it's very expensive. they can be very complicated. >> where is the majority of this type of crime coming from at the moment? because we're led to believe that a lot of measures have been put in place that made it a lot more difficult to operate in this type of way today. >> well, i do think you're seeing a lot stricter compliance at banks and where the banks don't have stricter compliance the regulators globally are stepping in and requiring the home increase their resource, increase their starvinffing, th
technology. the proceeds are still there. the proceeds of organized crime is still there. the need to finance terrorism is still there. that money goes somewhere else. it can go to trade finance, laundering through trade finance. can go to other kinds of financial institutions. it can go to more cash smuggling than through a bank. you're seeing that in colorado where marijuana sales are legal at the state level not at the federal level those businesses can't get banking services they have to keep everything in cash. there's been a huge increase in armored cars in colorado because of that. it also goes to more underground economy which is more difficult for law enforcement and government officials to track. >> there have been some loopholes for example in peer lending and it seems that the terrorists of san bernardino they did get a loan through peer
to peer lending which is not regulated the same way as big banks are. should they be? >> well there are lots of reasons that they should be regulated more like banks. but that's really the problem of terrorist financing, it's difficult to spot. there are very small amounts of money. i'm trying laund terrify proceeds of cocaine smuggling to southern california, that's millions of dollars i got to transport. those bombs cost $200 to put together. they go to $30,000 loan. unless somebody is on the list or sanctions list, that's not something that is going to catch beyond anybody's radar, no matter what the regulation is. >> that's a big problem because in effect you're saying we can't have our eyes every where. >> exactly. that's one reason that law enforcement and government officials rely on banks to have a reasonable program but everybody understands you're not
going to be able to find everything. >> there's proposed regulation that would enlist investment advisers, fund managers to have a closer look at their clients. there's the principle that many bankers have to adhere too. is that too onerous, costly for these investment advisers. >> i don't think so. investment advisers already have to get a lot of information for their clients for suitability for other sorts of issues. it's really just obtaining a little bit more information, sometimes a lot more and looking at it in different ways. and i think that's important to identify the proceeds of political corruption. there's other sorts of crimes that can gravitate towards investments, real estate things. >> you've been doing this job -- >> a long time. since 1998.
>> s >> is there a part of you that looks at regulation and the way we go after people that's not right. we could have people in the industry no iv years and they are 60 now and the way things were done 40 or 30 years ago work big corporates in the u.s., big banks, these days they get a phone call from a 24-year-old who works in compliance, for example, and already, you know, like calls have been made to long term clients that are just wrong, where people are being punished today for things that were very normal 40 years ago in terms of opening accounts. >> well, i don't know if punished is the right word. but there's been a lot of changes in the industry and way clients are approached. there's been a tremendous need to educate the business and a lot of firms and banks and
investment firms do a really good job of educating their business people to understand why this is important. and really, if you explain it to them and you make it as easy as possible under the circumstances, look nobody wants bad money in their firm, in their accounts, in their investments. sometimes you just have to explain the risk and that's one of the big problems i've seen by compliance officers, not explaining the risk. >> we really appreciate it. that's it for today's show. i'm carolin roth. >> i'm louisa bojesen. we'll be back tomorrow and look forward to your company then. for now "worldwide exchange". take care.
good morning. in the hot seat, wells fargo ceo heads to capitol hill to be grilled on the bank's sales practices. central banks in focus. the fed and boj both beginning two day meetings. we'ltalk picy expectations and market implications coming up. plus scores and more if you between sleep early. we have the highlights from monday night football. the eagles defeating the bears 29-14. it's tuesday, september 20th, 2016. "worldwide exchange" begins right now. ♪ this must be love ♪ that sound in my h