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’The EBA 9% rule and the Eurozone crisis
Back in October 2011, James Ferguson, banking analyst at Arbuthnot Securities, warned that the EBA’s tough new capital rules could be about to make the eurozone crisis a whole lot worse because the absence of fresh capital meant banks would have no other choice but to contract their assets.
The world’s strongest bank is…
… Singapore’s Oversea-Chinese Banking, according to analysis published by Bloomberg Markets magazine on Monday:
The winners receive a healthy dose of schadenfreude (not you #16) and a signed copy of the Basel III rules.
BoI refuses to go quietly
Bank of Ireland won’t bow to the inevitable.
Monday after (stock) market hours statement:
The Bank is discussing a number of structures with the State to raise the requisite Core Tier 1 capital by 28 February 2011.
The ECB’s technical insolvency
€60bn worth of covered bonds + €70bn of government bonds = €130bn of potential problem assets on the European Central Bank’s balance sheet.
A 1 per cent interest rate increase at a 3 per cent coupon with an average of seven years maturity makes just under a 5.32 per cent loss rate — which is quite a rough (but conservative) estimate by German financial consultant Achim Dübel.
Arbitrasel and the deployment of capital
Don’t be too comforted by this chart of US banking industry capital from broker-dealer Keefe, Bruyette & Woods:
Why not? First have a look at what KBW thinks is significant about these increased capital levels:
Short term capital management
From Morgan Stanley’s global banking analysts on Monday morning.
A big positive for US and other strongly capitalized banks and suggests buybacks could be larger and occur sooner than currently expected.
In CDOs we TruPS
Your daily dose of structured finance acronymic hindsight available right here, in a TruPS CDO edition.
From Fitch Ratings on February 12:
Fitch Ratings has placed 179 notes from 72 bank trust preferred (TruPS) collateralized debt obligations (CDOs) on Rating Watch Negative to reflect the increased default and deferral activity in bank TruPS assets.
Coco *pops* or not?
UK Banks were weaker across the board on Wednesday. What gives?
Here’s one suggestion from Evolution Securities’ Gary Jenkins:
FTSE 100 [fell 1.67% on Wednesday], not helped by further bank weakness led by a combination of factors,
Erste Basel-bothered is Austria
It looks like Austria has one more thing to worry about: The Basel banking reforms.
Part of the Committee’s proposals to `purify’ common equity Tier 1 capital for banks involves excluding minority interests from the regulatory measure.
Are Chinese banks massaging their losses?
Ratings agencies aren’t generally known for expressing negative views, but Fitch has really done a number on Chinese banks in its annual review on the sector, currently making headlines around the world.
Digesting the Basel reforms
The latest Basel proposals for the banking sector were released on Thursday, and they are not going down well.
Here’s a snap summary from the banks team at Credit Suisse:
The Basel Committee has published its latest thoughts on capital and liquidity.
How the IRS sort-of-saved Citi
Who says the IRS isn’t, umm, understanding?
The US tax authority exempted the Citigroup, and some other bailed-out companies, from rules which would otherwise have led to the troubled bank losing $38bn worth of tax credits.
All hail the Basel banking regime change
For it is — after much speculation and hand-wringing — here.
And here’s the summary of what the Basel Committee on Banking Supervision, which sets the supervisory standards for many of the world’s banks,
A Basel round-up for bonus-bugged bankers
Flying somewhat under bankers’ radars on Thursday, obfuscated as they are by new bonus taxes, are the maneuverings of the Basel Committee.
The Committee met on Tuesday and Wednesday to discuss a package of potential reforms to the global banking system.
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,
European banks to face capital demands
Big European banks are likely to be forced to cut their balance sheets or use a large proportion of their profits to build up capital, according to a new analysis of a proposed regulatory limit on total bank borrowing.
CoCo tastes different in Yorkshire
There’s a much more substantial test looming on the horizon for CoCos — the new darlings of the bank capital universe.
Yorkshire Building Society announced on Tuesday that it’s set to finalise a deal to take over its loss-making rival Chelsea.
Capital in the Hamp-er
For some reason we find the Home Affordable Modification Plan — the US government’s programme to encourage lenders and mortgage servicers to reduce interest payments for certain homeowners — and its impact on banks fascinating.
A CoCo Cashbox
Let’s get CoCorporate lawyer-y (sorry).
In recent weeks, FT Alphaville has become intimately familiar with the concept of CoCos, or contingent convertibles. We shall now turn to the mechanics of the actual capital structure (joy).
I should not have CoCo-ed?
As outlined in our criteria, we do not consider contingent capital securities to be a form of common equity. We can include them as hybrid equity depending on their exact features. If the conversion trigger is set at a level that we think would lead to a conversion occurring too late,
Bargaining Tier 1
Remember how the Fed was testing reverse repos with money market funds as a potential way to drain QE liquidity out of the system further down the line?
Well, some blogosphere talk (Zero Hedge, ahem) appears to suggest the Fed may now be backing away from the idea of using non-traditional participants like money market funds altogether,
The riskless FDIC guarantee
Q: What’s not a government bond or cash but has a zero-per cent risk capital weighting?
A: A bond sold as part of the Federal Deposit Insurance Corp.’s Temporary Liquidity Guarantee Program.
(A big hat tip to Reuters columnist Rolfe Winkler for spotting the below).
The Deferred Tax Asset disaster
Does anyone remember Deferred Tax Assets?
Banks like Citi used to be (and in fact, still are) stuffed with them. In fact the assets have become a point of contention over the past year and a half, as regulators,
Contingent capital comes to pass, with a little help from the EC
And so it began — the Lloyds statement detailing the bank’s plans to raise contingent capital is out.
This is a concept still confusing the market even as it’s gaining increasing prominence with regulators.
Banks too big to (excessively) bonus, FSA says
Take that Mervyn King!
The UK’s Financial Services Authority has just released a discussion paper — the second part of Lord Turner’s banking review — on “systemically important banks”, better known as `too big too fail.’ And while on Tuesday,
Capitalising on recapitalisation…
… is something that can be done by buying European banks’ Tier 1 bonds — even hybrid ones — according to Société Générale credit analysts.
The whole thesis is based, firstly, on the idea that under new regulation (the strengthened Basel II,
In case of capital emergency…
Break out the contingent capital.
Contingent capital is an idea that is gaining some credence. Fed chairman Ben Bernanke mentioned it in a speech late last month. It has also garnered a few mentions in academic texts,
Good news for banks, IAS 39 edition
Remember the International Accounting Standards Board’s proposed revisions to IAS 39?
The organisation wants to update the accounting standard, which sets out how banks and other companies should value and categorise their financial instruments.