Posts tagged 'European Banking Authority'

Now that that’s over…

Mario Draghi probably wasn’t expecting that his July 2012 comment that “the ECB is ready to do whatever it takes to preserve the euro” would coincide with the start of a relentless drop in bank lending to nonfinancial businesses far worse than what occurred during the first wave of the recession:

At least some of this decline can be explained by the lack of demand for credit in an environment of stagnant growth and relatively high real interest rates. But the robust growth of the euro-denominated corporate bond market — up by more than half since the start of 2009 — suggests that problems within the banks are also to blame. Read more

Of baby steps and EBA bank recaps

Right, we don’t want to get too “milk and cookies” about this but we have just one or two points to make about the European Banking Authority’s update on its bank recap exercise released on Wednesday. Some detail from the FT (with our emphasis):

European regulators have hailed their exercise to force the continent’s banks to buttress themselves with fresh capital as a resounding success, revealing 27 banks deemed to have a capital shortfall of €76bn last autumn raised a combined €94.4bn by the end of June deadline… Read more

Dear EBA, the central banks and emerging markets have got this

The central bank’s bank says those new European bank capital requirements DID dampen lending, prompt asset sales, and generally give everyone more to worry about in the past few months.

From the latest BIS quarterly review: Read more

European banks offer new capital proposals

European banks are proposing capital-raising measures that go beyond regulators’ demands and would cut only a small amount of lending to the real economy, according to a preliminary assessment of the plans by the European Banking Authority, reports the FT. In December the EBA identified a capital shortfall of €115bn at 30 banksand told the institutions to come up with plans to raise their core tier one capital ratios to 9 per cent of their risk-weighted assets by July.


EBA to challenge banks’ capital plans

The European Banking Authority is to challenge a significant proportion of the capital restructuring plans put forward by the continent’s leading banks to meet tough new capital requirements, the FT reports, citing three people familiar with the process. The regulator said in December that 30 banks needed to boost capital by an aggregate €115bn to reach a 9 per cent target for core tier one capital. The banks were given until January 27 to submit plans to the EBA, via national regulators, outlining how they would meet the requirement. The plans will be discussed by the EBA board next week. According to one person close to the process, as much as half of the measures outlined in those plans do not look credible. There are two particularly contentious tactics being employed – shifting the way in which a bank calculates the risk-weighting of its assets; and promising asset sales that are unlikely to attract buyers. Projected profits for the period to June also appeared over-confident in some cases, given the worsening outlook for the eurozone economy.

Where not to buy your sovereign CDS

As part of their recommendations for the recapitalisation of banks, the European Banking Authority released some shiny new data around credit derivatives that are linked to European sovereigns on Thursday.

DTCC data on credit default swaps are released on a weekly basis. However, these data are aggregated such that it’s impossible to know anything about individual banks’ exposures. The banks disclose some information themselves, but it’s often netted and marked in a way that makes it pretty challenging to compare, contrast, and interpret meaningfully. Read more

Want to boost tier one capital? Make losses and prosper

The EBA results came out on Thursday and for all of the discussion around what constitutes high quality core tier one capital, there was faint mention of the massive countercyclical component contained therein.

An example of a countercyclical accounting buffer would be DVAs — the gains that banks can book as a result of a deterioration of their own credit worthiness. When they are doing badly, they get a boost to their earnings. When things start to get better, they have to take corresponding losses as the earlier gains are reversed. Read more

It’s a capital ratio of two halves

Or, how crunchy a credit crunch from European banks might we get?

We know European banks have until the end of June 2012 to get their core capital ratios up to 9 per cent. The European Banking Authority is going to detail individual bank targets on Friday, Reuters reportsRead more

Here comes the (cross-border) bank deleveraging

In our history lesson after the eurozone summit ended, we cited the European Banking Authority’s Q&A on its requirement that banks raise €106bn as part of the bank recapitalisation plan.

The language was tough and tried to ease concerns that banks would excessively deleverage to meet capital requirements. But it was also (necessarily) vague, and there were no details on the extent to which the banks would be permitted to shed risk-weighted assets as they go about meeting those requirements. Read more

Gilt-stuffed and shrinking: euro banks’ capital hole

It’s afternoon in New York, which means at least one of the following is about to happen:

1. The abrupt appearance of odd confectionery in the FT bureau. Read more

Taking the stress test to nine

We are still to hear from Europe’s Dick Bove on Wednesday’s FT banking exclusive…

 Read more

EU banks face higher capital thresholds

European authorities plan to set a higher than expected capital threshold for the region’s banks and give them six to nine months to achieve that level or face government recapitalisations under the auspices of the eurozone’s €440bn rescue fund, the FT says, citing unnamed officials. The European Banking Authority’s board of supervisors has approved in principle the idea that banks should be made to raise their core tier one capital ratios – the key measure of financial strength – to 9 per cent, well beyond the current expectations of banks and analysts, even after absorbing writedowns on the value of their sovereign debt holdings. Some senior officials at the European Commission, which is due to unveil its own plan for bank recapitalisations , support the higher levels and could announce their backing as early as on Wednesday. However, some members of the EBA board, notably the German contingent, are understood to have dissented, and no firm decision has yet been taken.


Banks face new European stress tests

The European Banking Authority has started to re-examine the strength of the region’s banks, modelling a big writedown of all peripheral eurozone sovereign debt, the FT reports.  The regulator is also closely involved in talks with European officials and governments over mechanisms that could be used to forcibly recapitalise banks, enabling them to cope with sovereign defaults. Citing senior officials involved in the process, the newspaper says the EBA has been instructed to provide a country-by-country breakdown of how much new capital banks would need in the event that Greece’s bonds were written down. Angela Merkel, the German chancellor, said she was prepared to recapitalise her country’s banks if necessary. The IMF also gave its support for a quick recapitalisation. Antonio Borges, the IMF’s Europe director, pegged the cost of a Europe-wide recapitalisation at €100bn-€200bn, and urged leaders to require all European banks to take part. However France signalled it was uncomfortable with the accelerating talk of recapitalisation, insisting its banks did not need help.

Investors eyeing stress tests

Banks that scraped through the European Union’s stress test of 90 lenders will start feeling the heat Monday from investors to beef up capital buffers, Reuters says, although a wide sell-off was not anticipated by analysts or regulators. The relatively small shortfall identified by the European Banking Authority in the results, released after markets closed on Friday, sparked more accusations that the tests were not adequate. The failure to include a Greek default also irked investors, says Bloomberg.   However the clean bill of health given to larger Spanish and Italian banks may relieve funding pressures on BBVA, Santander and Intesa Sanpaolo, the FT says.

Debt deals could follow stress tests

The publication of European banks’ stress test results today could lead to a wave of distressed debt deals, the FT says. The results of the stress tests – due at 5pm UK time – are expected to see about 10 of the 91 banks tested fall short of having the required 5 per cent core tier one capital, including a clutch of four smaller Spanish savings banks and as many as three Greek banks. But bankers believe that a disclosure requirement relating to previously unpublished details of banks’ credit exposures – to other financial institutions, corporate borrowers and mortgage borrowers, all on a country-by-country basis – could trigger approaches for credit portfolios from specialist buyers.