My review of a fascinating book on swaps, derivatives, and Dutch supervisory shenanigans by Hester Bais and Wink Sabée The book by Hester Bais and Wink Sabée documents poor conduct by banks in the Netherlands during the first decades of the century. Warning: for non-Dutch readers, the book is only in Dutch now, but I… Read More ‘Worst Bank Scenario’ a book that should spark a discussion on bank supervision
In my latest post on The Conversation, I argue in favour of disclosure of stress test results of individual banks. The current hot housing market creates fertile ground for speculation about the financial stability of the New Zealand banking system. See the latest addendum to the RBNZ Financial Stability Report, which creates the impression that… Read More The Conversation: “Why now would be a good time for the Reserve Bank to publish stress test results for individual banks”
The Reserve Bank of New Zealand just published its latest Financial Strength Dashboard data. It is now up to date until 31 December of last year. A summary Capital went up. Largely thanks to restrictions on distributions and perhaps a donation from a generous parent bank, aggregate CET1 ratios are now well over twelve percent.… Read More Fresh RBNZ dashboard data confirms New Zealand’s banks are resilient – again
Yesterday, The Conversation featured a publication that Professor David Tripe initiated. It is about Westpac. First time for me to co-author with David, and I am happy with the result. See the link to the article here.
I always hold my breath when a bank official speaks in public about some nerdy accounting topic. Last week was no exception: Bank of England’s Governor Andrew Bailey spoke about the prudential treatment of software assets, see the speech here. The short story is that the Bank of England doesn’t like the way Europe treats… Read More Software assets – to deduct or not to deduct …
Just noticed this announcement from the Reserve Bank of New Zealand, which decided to further delay the start of increases in bank capital until … drumroll … 2022. This to allow banks continued headroom to respond to the effects of the COVID-19 pandemic and to support the economic recovery. The announcement includes an indicative timetable… Read More RBNZ announces further delay of capital plans
Against the backdrop of recent European bank mergers, it is worthwhile examining the effects of acquisitions on regulatory capital. This is interesting because many European banks trade below book value. Normally, firms that acquire other firms pay a premium over book value to purchase the target firm. This premium is called goodwill. However, with the… Read More Badwill accounting
This week and the last, the Reserve Bank of New Zealand published two speeches discussing the strength of our financial system. It has been a while that I heard Geoff Bascand and Toby Fiennes on this topic, their speeches were as welcome as they were overdue. Geoff encouraged banks to be courageous. To support the… Read More Balls please, no horses
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?
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