Eyes Wide Shut: Did Bank Capital Grow under RBNZ’s Governor Orr?

And what does it mean for one bank in particular? Last week, audit firm KPMG published its quarterly Financial Institutions Performance Survey (or FIPS). It featured the deteriorating profitability of New Zealand’s banks. Bad news of course, and the New Zealand financial press quickly jumped on the survey. Radio New Zealand printed a headline sporting… Read More Eyes Wide Shut: Did Bank Capital Grow under RBNZ’s Governor Orr?

Max Headroom: Discretionary Capital Buffers and Bank Risk

I posted my paper on SSRN. It examines the association between discretionary capital buffers, capital requirements, and risk for European banks. The discretionary buffers are banks’ own buffers, or headroom: the difference between reported and required capital. I exploit capital requirements data that banks started to disclose since the release of a 2015 European Banking… Read More Max Headroom: Discretionary Capital Buffers and Bank Risk

Max Headroom

Fragile by design Banks are fragile by design*. They have lots of debt, equity is only a fraction of total assets, depositors can withdraw their money on the drop of a hat. If depositors want their money back then there is a first-come-first-served rule, which differs from non-bank, corporate (orderly) bankruptcy, where creditors know their… Read More Max Headroom

The curious share price movements of four big Oz banks on 5 December 2019

On 5 December 2019 at 12:01 pm, I received an email from the Reserve Bank of New Zealand. The email announced some important decisions about the Bank’s capital review. As the email contained summary information only, I went to the RBNZ website to get the documents explaining the capital review decisions. Unfortunately, it was impossible… Read More The curious share price movements of four big Oz banks on 5 December 2019