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’How to arb Basel II
In a previous post, we detailed trades that while making no sense economically, allow banks to game regulations around capital requirements and kick the recognition of losses further down the road.
This may have left you wondering how this is possible under the Basel II regulations,
More Angry Birds, less regulatory arbitrage, please
Last Friday, FT Alphaville noted a rather interesting notice from the Basel Committee. It indicated that some banks have been engaging in a rather outrageous bit of financial engineering. The end result of the alchemy was the kicking of losses further down the road and the improvement of capital ratios.
Regulatory arbitrage: Basel is watching you
Nearly a year ago, the Federal Reserve came out with a letter that in summary said something along the lines of:
Dear Banks,
About engineering financial transactions that allow you to defer losses and arbitrage regulatory capital charges:
Regulating 2000s RBS… with 2010s rules
…we don’t like carrying more capital than we need to. You’ve heard me before on the subject of building up war chests and carrying; that’s not the way we would wish to operate at all.
– Fred the Shred on an investor conference call,
Blood from an EBA stress test stone
For now, the European Banking Authority’s 2011 stress tests are a starting point to determine the potential bill for recapitalising euro banks for their sovereign exposure. Most analyst estimates of capital needs — those big juicy €100bn,
The cost of being a global Sifi
Global Sifi buffers is both the likely new name of FT Alphaville’s pub trivia team and a hotly followed piece of financial regulation.
The Financial Stability Board is not due to formally announce its capital recommendations until November,
How to tinker with bank risk-weightings
Risk-weightings for bank assets are still relatively new things.
Codified in the Basel II rules first published in 2004, they were meant to shift financials away from set levels of required capital,
Basel III blurs
Here’s a capital curio for investors in Credit Suisse’s Monday-announced CoCos issue.
It’s probably not a surprise that a transition from the Basel II to Basel III regulatory regimes might create some scope for capital confusion.
Basel-ed again
Believe us, it’s taken all our willpower to not headline this post as Basel Faulty.
The London Banker has returned to blogging after a two-year hiatus. And boy, that 24-month break has done nothing to quell this former central banker’s ire.
Risk-weighting the eurozone
Presenting one of the more ironic headaches for sovereign issuers and European banks out there at the moment. At any rate, we’d point to a great story from Joel Clark and Ellen Davis of Risk Magazine.
We’ve noted Europe’s increasingly two-tiered government bond market before.
‘Capital requirements increase systemic risk.’ Discuss.
Is this what went wrong with Basel II?
Is this what will go wrong with Basel III?
A recent working paper from the Dutch central bank starts with the provocative question: “Why the micro-prudential regulation fails?”
SocGen’s skinned CLO
Synthetic CLOs — gone for good or simply slumbering the deep sleep of securitisation?
From Asset-Backed Alert:
A resurgence of synthetic collateralized loan obligations appears to be taking shape in Europe,
UBS is not a “below average” bank
Swiss bank UBS has responded to Monday’s report from Standard & Poor’s, which you may recall ranked 45 of the world’s leading banks according to their risk-adjusted capital (RAC) ratios.
By S&P’s reckoning,
Would you like a massage for your stressed VaR?
The BIS has released its analysis of proposed changes, adopted in July, to Basel II capital rules.
It’s basically an exercise in seeing just how much more capital banks will have to hold under the rejigged rules,
How the Basel II capital cliff begets resecuritisation
Basel II banking regulations are sooooo boring.
But Basel II’s effects on securitisation are fascinating, right?
Let’s begin.
Rating agency Fitch is guiding us through the Basel II regulations,
On killing the market for complex products
Proposed changes to Basel II banking regulations have not necessarily been getting the attention they deserve.
Hence, we read with interest a fantastic Deutsche Bank note on the impact of the adjustments,
Failing the stress test; or, in the long run, we’re all dead
Earlier this week, Andrew Haldane, the Bank of England’s director for financial stability gave a speech to the Marcus-Evans Conference on stress testing.
While that doesn’t exactly sound particularly enticing,