Out of the aggregate €5.8bn to be raised from deposits, how much would come from smaller depositors, and how much from the €100,000-plus accounts? Clearly a bit of thought went into this when the bail-out was being discussed. Burden allocation, and all that. Read more
Raise your hand if you didn’t first hear about the way in which the Dutch government took over ailing SNS Reaal on February 1st and think ‘oh, really now?’ along with an arched eyebrow.
The mechanics of the takeover are interesting indeed, but given that two of the four largest Dutch banks have been nationalised, we have a bigger picture question:
How much warning was there that SNS Reaal was on the brink? Read more
Officials fighting the next financial crisis may again bail out banks using the public purse, S&P has said, in an opinion that casts doubt on one of the fundamental tenets of US financial reform. The FT reports the rating agency said that the US Treasury, Federal Reserve and Congress might rescue a large financial group rather than allow it to fail like Lehman Brothers. Dodd-Frank, the legislation signed into law a year ago next week, was supposed to prevent bail-outs by allowing the government to seize and wind down safely an ailing “systemically important financial institution”, or Sifi. But in a research note, S&P said: “We believe the government may try to avoid contagion and a domino effect if a Sifi finds itself in a financially weakened position in a future crisis.”
A key German bank regulator has proposed a new approach to bank bail-outs, warning that regulators are “light years away” from agreeing an international framework for winding up failing banks despite the inevitability of more bank bail-outs, the FT reports. Jochen Sanio, head of German regulator BaFin, called for “bail-in” measures, which would force creditors to share the cost of propping up large banks before government bail-outs are required. His remarks, on the sidelines of a London conference on Monday, were supported by other European regulators at the gathering, highlighting a growing transatlantic split over dealing with risks posed by the largest global banks. Read more