Are the EU bank capital shortfalls really that bad?

Shortly after the publication of the  2016 EBA stress test results, Viral Acharya, Diane Pierret, and Sascha Steffen (APS) presented a paper that identifies capital shortfalls that are significantly larger than EBA’s shortfall calculations reveal. Reuters quickly picked up the highlight of the paper: “Using the Fed’s approach, the 51 European banks showed a total […]

The EBA Stress Test Data in Handy Format

Please find here the EBA 2016 stress test data in a handy format that allows quick comparison with data of the 2015 Transparency exercise. This allows you to compare data from December 2014 to December 2015. I stuck to only the data from the “Other” template, but it does cover all scenarios. I replaced variable […]

That feeling when you notice that EU leverage ratio requirements are at risk

This week, the EBA and BCBS published the Basel III monitoring results. They show a further improvement of European banks’ capital positions, largely fulfilling the future regulatory capital requirements, with only a very small number of banks suffering from potential capital shortfalls. I found Figure 9 of the EBA report interesting. It shows the evolution […]

EBA updates its Risk Dashboard

The European Banking Authority (EBA) published today the periodical update to its Risk Dashboard summarizing the main risks and vulnerabilities in the banking sector on the basis of the evolution of a set of Risk Indicators (RI) across the EU. You really have to critically analyse this report, as it contains mixed messages on the capitalization […]

Deutsche Bank’s buyback justifies more fair value accounting

Deutsche bank intends to buy back a significant amount of debt, according to the FT. Interestingly, I wrote about these buybacks in a paper with Annelies Renders of Maastricht university. These buyback transactions are generally disappointing. The idea is to generate CET1 capital, but this goes at the expense of liquidity and solvency, thus not contributing […]

Is the European Commission phasing out MREL?

It spooked the markets for good reasons, but the leaked EC document on the merger of TLAC and MREL did not receive the attention that it deserves. Yes, Reuters reported on the leaked Information Note from the Commission Services for the European Commission Expert Group on Banking, Payments and Insurance. However I am not sure […]

Results of EU consultation on bank financing are out

Following up on an earlier post, the EC now published the answers on its consultation on long term finance. Thought the topic is hot, only 87 responses were submitted*, of which only two by academics. One by Martin Hellwig, the other by Martien Lubberink. The low public participation by academics is depressing, given that they called […]

FYI some documentation on the Leverage Ratio for EU banks

My post on EU leverage ratios yesterday attracted some comments on twitter, which may haven been triggered by misunderstandings. The CRR offers a short and clear summary of the Leverage Ratio definition in Article 429.1: “The leverage ratio shall be calculated as an institution’s capital measure divided by that institution’s total exposure measure and shall […]