RSS feedBasel III
’Recapturing the losses of the crisis
Deferred tax assets are a favourite of FT Alphaville’s. Some banks made such awful losses during the crisis they opted to store the losses on balance sheets for a sunny day when they started making profits again.
Pandit’s big idea
FT Alphaville has intercepted a recent phone call between banks and their regulators!!!
Regulators: “We’re going to revise the capital adequacy framework and increase transparency in the reporting of risk on bank balance sheets.”
European banks ‘need tons of money’, says GMO
In a note released on Tuesday, GMO, the global asset management firm headed by Jeremy Grantham, writes that ”European banks need tons of money” to correct capital shortfalls. This much, we know.
But the five scenarios used by Richard P.
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,
Will a Basel risk-free ‘about turn’ be enough?
News that Basel III is reconsidering the use of government bonds as eligible capital to be held in banks’ so-called liquidity buffers, couldn’t have come quicker.
The world, for want of another phrase,
Taking the stress test to seven
(Reuters) European Union banking regulator EBA has demanded that lenders achieve a core tier one ratio of at least seven per cent in the current round of internal stress tests, banking and regulatory sources told Reuters on Tuesday.
Regulators unite!
You have nothing to lose but your capital requirements.
Some choice excerpts from the Basel Committee’s new report finding that global growth would face relatively few effects from making the world’s biggest banks (“G-SIBs”) hold extra capital:
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,
A genuinely stressful stress test
Wouldn’t it be nice if bank stress tests were, well, stressful?
Too often they look like they’re done by him:
When they should be done by her:
Fortunately Arbuthnot’s Mr. Banks, James Ferguson,
Meet the institutional investors
The end-users, the clients, the buyside. Or in more standard parlance – institutional investors. Not “buyside” like hedge fund — more like your pension fund, insurance companies, reserve managers, sovereign wealth funds,
Italy – bite-sized CDS, taste the volatility
The Markit iTraxx SovX CEEMEA contains a basket of 15 sovereigns from Central and Eastern Europe as well as the Middle East. Italy’s CDS spread is now wider than all but one of them – Ukraine.
Looking at the Markit CDX.EM,
Risk-weighting down under
There might be some wiggling about liquidity but the worldwide work of getting banks ready for Basel III goes on. Though there’s been an interesting development in Australia recently.
Australian banks
When Solvency met Basel
Solvency II (insurers) and Basel III (banks).
Both add fresh minimum capital requirements to their respective industries. Similarities generally stop there. The very definition of capital is different,
Mirror, mirror on the wall, who has the highest DTAs of all?
Deferred Tax Assets (DTAs) have been mentioned (usually critically) on this blog many times before. Put very simply, they are tax carryforwards that can be included in banks’ Core Tier 1 capital ratios.
The CoCo cap – a mere €150bn?
The CoCo death spiral is the process by which the expectation of a swathe of bank-issued Contingent Convertible (CoCo) debt converting into equity can exacerbate share price declines.
Or more specifically,
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 much is this plain vanilla derivative in the window?
Just to be totally clear we’re talking plain vanilla derivatives like, say, interest rate swaps a bank might arrange on behalf of a company. But it seems they’ve taken on a more exotic flavour, of late.
Brussels, not Basel
Also: why ‘maximum harmonisation’ might end up getting someone’s Vickers in a twist.
An odd bump in Lloyds and Barclays on Monday:
It’s probably helped by a great note doing the rounds from Citigroup banking analyst Ronit Ghose,
Dick Bove says folks at the Federal Reserve have ‘lost their minds’
Really.
And it’s all because of one little speach by Daniel Tarullo. The Federal Reserve Board governor took to the Peterson Institute stage on Friday to recommend that systemically-important financial institutions (SIFIs) increase their capital ratios by 20 per cent to 100 per cent over their current levels.
Some big bank trades
It’s all change for banks, for sure. But if you’re seeking some trade ideas to cover ‘global’ banking themes like Basel III and CoCos, then Barclays has got you covered.
Basel and a widowed Lloyds balance sheet
Funny coincidences, Lloyds Banking Group edition.
Last night Bloomberg reported that Lloyds has ruled out a sale of its insurance arm Scottish Widows. A sale had been seen bullish for the bank, by disciplining its vast post-crisis balance sheet a bit more and allowing return on equity to drift into the high teens.
How the Basel III sausage gets made
Otto von Bismarck may have been talking laws when he made his first sausage analogy, but it’s well-suited to the creation of Basel III banking rules. Just think of all the toing and frowing over things like upcoming Liquidity Coverage Ratios (LCRs) and Net Stable Funding Ratios (NSFRs).
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.
An MEP out to risk-weight the eurozone
Here’s a tip for all financial journalists and market participants.
To spot the next source of financial instability — simply identify the assets currently considered ‘safest.’ At the moment we’d argue those are covered bonds,
Choose your own risk retention
So now that the Federal Reserve has gifted US banks with a one-size-does-not-fit-all policy in (some) securitisation risk retentions, which version will they be going for?
After all, they’ve got horizontal and vertical (and even L-shaped) slices to choose from.
Covered bonds as the new sovereigns
Non-German readers won’t be able to read this article by a representative of the German finance ministry (except, perhaps, through the magic of Google Translate).
But we can summarise it for you.
The author,
Bank dividend day
And so it begins, again.
No surprise that the KBW Bank Index and the financials component of the S&P 500 both beat the broader index (red line below) on the day:
We’ve known that Bank Dividend Day was coming since last November,
The where and what of regulatory arbitrage
Get the little flags at the ready: on Tuesday JP Morgan Cazenove published the final installment of its trio of reports on regulatory arbitrage.
It is stirring patriotic sentiment up on Capitol Hill,