The Conversation: “Why now would be a good time for the Reserve Bank to publish stress test results for individual banks”

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”

Fresh RBNZ dashboard data confirms New Zealand’s banks are resilient – again

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

Badwill accounting

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

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