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’Tear down this hybrid capital wall
The crackdown on hybrid capital begins and the Basel Committee on banking supervision is on the case.
From the FT:
The rules will force banks to substantially improve the quality and extent of the capital buffers they hold to absorb shocks.
KBCoupons!
The adventures in banks’ hybrid Tier 1 debt continue apace this Wednesday morning, via Belgium’s KBC.
From a Tuesday press release issued by the partially state-owned bancassurer:
1 September, 2009 – 5.45 p.m.
FDIC’s capital twist
The Federal Deposit Insurance Corporation much-awaited rule changes for private equity firms
FDIC, which insures US banking deposits, voted 4-1 to require private equity buyers of banks to hold higher-than-usual levels of capital.
Hybrid security (or not)
The market for the hybrid debt of British banks was rather roiled last week
First there was news that Northern Rock would be deferring payment of its suboordinated debt coupons. Then then there was a mass-downgrade of the hybrid debt of banks including Lloyds and RBS,
Bringing it back (on balance sheet)
Amid all the accounting-related chicanery currently taking place, the one below, we think, has been flying rather under the radar.
From Asset-Backed Alert:
U.S. government officials are aiming for September to decide once and for all how banks’ capital reserves should reflect a tidal wave of securitized assets that are headed for their balance sheets.
Northern Rock’s capital cracks
So much for the revived Rock.
From the bank’s just-released interim results:
In February 2009, the Company announced that it intended, as part of its revised strategy, to lend up to £14 billion over the next two years,
Northern Rock covered
What’s this? Northern Rock has fallen below its minimum regulatory requirements?
Northern Rock’s capital base has now reduced to a level below its minimum regulatory capital requirement.
Stress test capital shortfall could have been $68bn bigger
The scenarios contained in the US banking stress tests have been much criticised. Now, the type of capital used in the SCAP is coming under scrutiny.
This from RBC Capital Markets’ Gerard Cassidy:
Overall we were pleased with the transparency the level of detail given by SCAP but we have a couple of criticisms of the program.
Stress test tension and the question of converting capital
One part of the stress test seems to be a little problematic, for some. While the results revealed a $185bn shortfall in capital amongst the 19 biggest American banks, the SCAP will only need to replenish them with $75bn.
George Magnus, green shoot weed-whacker
“Recession’s end”, Bloomberg commentators included in their headlines on Wednesday night, while others noted that inventory reductions indicate that the economy is nearing a bottom. Green shoots, green shoots,
Update from the battle against procyclicality
“In light of continued stress in financial markets” the Fed is delaying new rules that would have further limited the amount of restricted stuff that can be included in banks’ Tier 1 capital ratios. The new date for implementation is March 2011.
S&P to kill banks?
CNBC is running an interesting piece of analysis by Michelle Caruso-Cabrera, titled “The Unintended Consequences of Gov’t Intervention”
Here’s the basic premise. Included in the recent American Recovery and Reinvestment Act of 2009 was this line,
Risk-waiting
Further to our Tier 1 vs tangible common equity series, we have this from Dash Riprock, the ex-CDO-underwriter and guest-blogger at Option ARMageddon, with perhaps the best name in the credit markets.
Riprock is using the following example to explain how Tier 1 capital — specifically the risk-adjusted side — works.
Ex-Amaranth trader bounces back
Brian Hunter, the trader who was blamed for the collapse of $9bn hedge fund Amaranth Advisors two years ago, has taken advantage of last month’s plunge in commodity prices to help propel the year-to-date return at the fund he now advises to 230%.
Capital raises $2.25bn fund
The private equity division of Capital International, one of the world’s largest money managers, is set to announce it has raised a $2.25bn fund to invest in emerging markets. The fund will rank Capital at the top of the size charts for global EM funds closed this year.