Confidence in the stability of the UK financial system as a whole over the next three years, charted by the Bank of England…
First a reminder about this coming Monday, October 29th.
Andy Haldane, the Bank of England’s executive director for financial stability, will be giving a talk at Friends House, right across the road from Euston station. FT Alphaville is very happy to be chairing. Kickoff is 6pm.
While the event is free, you do have to reserve a seat. Click here to do so. Read more
So you’re a global systemically important financial institution and, bar a few near global meltdowns, you have a pretty good time of it… but you also know Basel III is fast coming down the tracks and in its attempt to make you better able to stand up to those unexpected shocks that nobody likes, it will force a load of restraining rules upon you.
Fitch has gamely joined the ranks of those trying to put some numbers on the whole thing. The ratings agency had a look at the 29 global systemically important financial institutions (or G-SIFIs, a horrible acronym for banks listed at the bottom of this post), which as a group represent $47tn in total assets, and estimated that they might need to raise roughly $566bn in common equity in order to satisfy the new Basel III capital rules: Read more
As FT Alphaville revealed on Monday, more than 98 per cent of credit derivatives contracts are recorded in the trade repository run by The Depository Trust and Clearing Corporation. This demonstrates that this previously opaque market is much more transparent than it used to be.
In Tuesday’s FT, Conrad Voldstad, the chief executive officer of trade organisation ISDA, rammed the point home and was on top form espousing the merits of credit default swaps. Read more
Deutsche Bank’s fixed income research team don’t see any need to beat around the bush.
We’re in the early stages of the Global Sovereign Crisis. End of. Read more
Macro Risk Advisors, headed by Dean Curnutt, are specialists in derivatives strategy. One of their chief occupations is thus evaluating risk and volatility.
Given that, it’s probably fair to say they’re in a good position to comment on matters “systemic risk” related. Read more
Via Bloomberg (H/T Chris Whittall):
Lawmakers in the [European] Parliament voted that clearinghouses should have to hold capital of at least 10 million euros ($14.1 million) to absorb possible losses…
Global regulators are seeking ‘graduated’ capital surcharges for the world’s biggest banks that increase with their size and connections to other lenders, the FT says. The Financial Stability Board has coalesced around placing three to six ‘gradations’ of extra capital on top of Basel requirements for the lenders designated ‘systemically important’ by the FSB later in 2011, regulators told the FT. The charge will disadvantage top-tier US and European banks versus their second-tier compatriots and their more domestically-focused Chinese and Japanese rivals. The FSB next has to decide on whether the Sifi charge should take the form of equity or should allow contingent capital to be included.
International regulator conspiracy? Unfortunate coincidence for the ETF industry? Or are regulators finally on to something via the power of group think?
We ask because hot on the heels of the Financial Stability Board’s warning about exchange traded funds on Tuesday comes “Annex 1.7” of the IMF’s latest Global Financial Stability report, entitled ETF Mechanics and Risks. Read more
The “Further further readings” post usually runs in the late afternoon US time, but in this case you can file it under “we forgot to hit publish”. Doh! Or consider it a Tokyo special. Either way, sorry about this.
For the commute home, where you always pass your Irish stress tests,
For the commute home, or while rocking out to Paradise City, or while shielding yourself from the November Rain, or while chasing your Rocket Queen, or while exercising Patience; and because you Don’t Cry, you Live and Let Die,
– Welcome to the jungle: Ex-G’N’R bassist starts wealth management firm. Read more
No, this isn’t a festering collection of mutant organisms…
This — in case you were wondering — is a list of what some academics see as today’s most systemically risky financial firms in the US:
Cast your minds back to the SCAP — that’s the Supervisory Capital Assessment Program, better known as the US banking stress tests of spring 2009.
The results showed Bank of America, Wells Fargo and GMAC as requiring the most amount of capital; in other words, they were expected to generate the most losses. Read more
Leading hedge fund managers have hit back at calls for tougher regulation of their industry made by Gary Cohn, Goldman Sachs president, in Davos, the FT reports. Mr Cohn warned that bank regulation would send risk into the shadow banking sector, including funds. One manager accused Mr Cohn of behaving “cynically” to try to distract regulatory attention. “Until 18 months ago, Goldman Sachs was the biggest hedge fund in the world,” this person said, referring to the bank’s sizeable proprietary trading activities, which allowed the bank to speculate with its own capital. Nevertheless, Deutsche Bank’s chief executive Josef Ackermann also pointed to systemic risk from hedge funds at Davos, Bloomberg says.
Those worried that Dodd-Frank was overly-cautious in tackling ‘Too Big To Fail’ issues are unlikely to be comforted by the concentration limits study released on Tuesday by the Financial Stability Oversight Council (FSOC).
Quick background — Dodd-Frank prohibited a financial company from merging with or acquiring another firm, if the result was a company with over 10 per cent of the “aggregate consolidated liabilities” of all firms. Read more
Look on the bright side, we now know which rules the rulemakers will follow to get us to the Volcker rule. Some of them, at least.
The Financial Stability Oversight Council on Tuesday released its six-month study into the Volcker rule and held its third public meeting. Read more
Basel is busy bolting stable doors.
Indeed, one of the big drivers behind new Basel III counterparty risk capital requirements is the infamous negative basis trade. Read more
Confused about just how the Dodd-Frank Act would actually change derivatives markets? Happily, Barclays Capital’s Rajiv Setia and team have tried an answer.
Not so happily, the answer is a bit disconcerting. Read more