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’Choose your own MBS accounting
Basel III. Accounting. Mortgage-Backed Securities. Yawn.
But wait — Basel III’s attempt to incentivise banks into managing their interest rate risk could be about to permanently alter the way banks handle some $1,480bn worth of MBS,
Citi’s Basel-dodging, capital-avoiding, accounting switch
Citi doing weird accounting manoeuvres? Perish the thought!
From the bank’s first-quarter results press release:
In the first quarter 2011, Citigroup transferred $12.7 billion of assets in the Special Asset Pool in Citi Holdings from HTM to trading.
Centralised price discovery!
Behold a central pricing solution for illiquid assets… stuff like TruPS CDOs or, err, Irish bank loans.
Now that comes from independent valuation consultancy firm PF2 Securities Evaluation, so there’s more than a little self-interest here.
Those European stress test details
In case you forgot that other crisis…
The European Banking Authority has just published parameters for the upcoming European bank stress tests. A first glance has them about as meek as expected.
Major points and assumptions below:
Lloyds’ first (£8bn) HTM accounting switch
A new line on Lloyds just-released banking results:
That’s a reclassifcation of Lloyds assets from available-for-sale to held-to-maturity.
AFS to HTM changes have been a not unusual practice for banks in recent years,
SocGen on depleted Spanish bank loan loss buffers
For some months now, all the Spanish banking concern has been focused on funding and net margin issues. Worries about loan losses (so 2009) have ebbed away.
On Wednesday, Société Générale’s banking team says it’s time to revisit the issue.
Good books, bad books at the banks
Spotted on the Financial Accounting Standards Board website:
FASB may have backed off mark-to-market accounting for banking assets, but the US accounting body might still decide to make some significant changes to the way banks provision for loan losses (you know,
An accounting boost for CoCos
How regulators can build a market for reasonably-cheap-to-issue Contingent Convertible capital, by Barclays: Step 1) Eliminate mark-to-market accounting to ensure that asset price swings never result in a CoCo trigger being reached…
EFSF yours! says Eurostat to EFSF lenders
Fresh from Eurostat, the future of the EFSF.
At least, in terms of the way it’s accounted for in Europe’s national accounts. The statistics body figures that funds raised by the European Financial Stability Facility (EFSF) will have to be recorded in the gross government debt figures of the eurozone states which guarantee it,
Another AIM success story [updated]
Dodgy “rent-a-doctor” company explodes — film at eleven:
HCL announces that the ordinary shares of the Company have been suspended from trading on AIM with immediate effect…
The Board has strong reason to believe that the financial performance of HCL for the year to 31 December 2010 will be materially below market expectations.
2011 is the year of accounting ‘condorsement,’ Fitch says
This is meant to be the year of accounting convergence.
You’re probably already yawning by now — but wait! This is important.
Countries including Canada, Korea and India are expected to implement International Financial Reporting Standards (IFRS) in 2011 — but the accounting world’s attention will really be focused on what the United States decides to.
Loan loss reservations, US bank earnings
Did you think US banks’ 2010 results would actually mean something?
Silly you. Don’t you know their earnings — like those from 2009 — will be skewed by falling loan loss provisions set aside to cover bad debt.
Belgian banks exposed to Belgium
Belgian bonds are blowing out.
Which means pain for any (unhedged) entity holding the stuff — for instance, Belgian banks. Citigroup attempts to quantify Belgian financials’ exposure to their host country in a Wednesday research piece — though it’s worth noting that they do reckon Belgium “is in a far stronger position than the [European] peripheral countries”
From Hamp footnote to Hamp legacy
A footnote, from the US Treasury’s Hamp programme.
The Home Affordable Modification Plan was created in the spring of 2009 with the stated goal of keeping delinquent homeowners in their houses. It’s now widely regarded as a failure — with just 519,648 permanent modifications completed.
Profit & loss ‘reversal’ at RBS
It’s October 2008.
We’re in the depths of the financial crisis.
And one almighty debate about mark-to-market accounting.
Under an amendment to IAS39, the International Accounting Standards Body quickly grants banks a temporary reprieve from fair value forces.
Spain is all about the banks
Fact du jour — Spanish debt-to-GDP ratios aren’t actually (relatively) that bad.
In terms of eurozone contagion then, what tends to spook investors is really the possibility of a banking crisis swiftly feeding into Spain’s public finances — especially given that Spanish banks are still quite reliant on short-term wholesale funding.
The Spanish (asset) Elimination
A top-read story on Bloomberg this Thursday morning?
One that combines the words ‘foreclosed homes’ with ‘Spain’ and ‘tripled’ :
Nov. 25 (Bloomberg) — The number of foreclosed homes for sale in Spain may triple next year as new accounting rules prompt lenders to dump their depreciating assets,
RBS and its CDO … or APS … hit
Poor Royal Bank of Scotland.
RBS has fallen victim to one of the quirks of fair value accounting in its just-released third-quarter results, in which the bailed-out British bank posted a net loss of £1.14bn,
One size does not fit all in ABS risk, Fed says
Risk retention requirements for Asset-Backed Securities *yawn.*
But the 96-page report released by the US Federal Reserve this week — outlining the potential impact of risk retention on ABS — makes for interesting financial crisis forensic reading.
The non-accountant at the IASB
Call off the search. After a year-long global quest and the examination of more than 300 applications, the International Accounting Standards Board has found its man.
And he’s not an accountant. He’s this man:
QE and exploding pensions, again
Citi is back with another take on low bond yields and pension accounting.
And before you fall asleep (wake up!) this is an update of Citi’s March 2009 note on quantitative easing and exploding pensions.
Mike Mayo’s Citi DTAaaaaaaattaaaaack!
Where oh where, did the Mike Mayo vs Citigroup dispute begin?
The CLSA bank analyst hit headlines last week after Fox Business News revealed Mayo had been “frozen out” by Citi. The reason? None other than Citi’s infamous deferred tax assets (DTAs) :
When a CEO is lying to you…
‘Twas featured in last week’s Economist — but here’s the full paper on ‘Detecting Deceptive Discussions in Conference Calls.’
It’s by David F. Larcker and Anastasia A. Zakolyukinaz of the Stanford University Graduate School of Business,
The FSA’s finance fix (Part III): dampening profits
Continued from Part II.
A valuation-based approach may be the FSA’s preferred option for fixing banks’ trading books and fortifying them against future risk, but it’s difficult, to say the least. The very thing the FSA is trying to remedy — inconsistent valuations — seem endemic in the financial system: