Yesterday Bloomberg ran a qualitative story on how much capital U.S. banks need. The story mentions some percentages, and then settles for a leverage ratio of 20%. However, the author of the article, James Greiff, offers no numerical support for the 20%. So, here are some numbers. Using data from U.S. Bank Holding Companies, I… Read More How much capital U.S. banks need, some numbers
Following up on my graph on corporate versus bank solvency ratios, this graph illustrates the difference between two Tier 1 ratios reported by U.S. Bank Holding Companies over 2001-2012. The blue histogram shows the Tier 1 Leverage Capital ratio, the red histogram shows the Tier 1 Risk-Based Capital ratio. Both measures use the same numerator: Tier… Read More Leverage Capital Ratios vs Risk-Based Capital Ratios of U.S. Banks, a graph.
Yesterday the Dutch government announced that it asked ABN Amro to prepare for re-floating on the stock market. The Dutch bank was nationalized in 2008 after the collapse of Fortis. With EU requirements on State support for ABN Amro expiring next year, the bank could be freed from the State as soon as next year. According to the… Read More ABN Amro’s dodgy spin-off readiness
Shortly after my posting, Deutsche announced it would not call its perpetual bond, reports Reuters. One rationale for not calling could be that the bond would still be useful as bailinable debt. An interesting trade-off has been made in favor of keeping old-style instruments over new, Bazel III-compliant, instruments. One could argue that a choice… Read More Update on Deutsche
Miles Kimball’s Confessions of a Supply-Side Liberal mentions my post on Convertible Capital instruments. Note the apt picture! Update: Pieria also features the repost of Miles.
On July 17, I posted on this blog about the difficulties that EU banks face when replacing pre-crises capital securities with Basel III compliant securities. Today the WSJ illustrates these difficulties for Deutsche Bank. This bank struggles with capital securities that were issued before the financial crisis made us painfully aware of their abysmal prudential… Read More Deutsche’s phase-out of old-style capital securities and the meaning of perpetual debt
I added the NZ Open Bank Resolution framework to my list of links, on the left. This in light of the CoCo discussion on my blog. For ease of use, see below: NZ Recovery and Resolution A primer on Open Bank Resolution Open Bank Resolution Open Bank Resolution (OBR) policy – Q&A EU Recovery and Resolution… Read More Some housekeeping on CoCo’s
Reuters reported on a leaking source from the European Banking Authority who mentioned that Europe has set itself a “completely illusionary” timetable for the next round of bank health checks. An interesting Catch 22 thus ensues: adhering to a strict timetable would lead to cutting corners, thus endangering the reputations of European bank supervisors. Not-adhering… Read More The European Bank Asset Quality Review, an inconvenience, but for whom?
One way a bank can manage its solvency is by changing the denominator of its solvency ratio, in this case of its BIS ratio. (The BIS ratio is the ratio of capital divided by Risk Weighted Assets often refereed to as RWA). The plot below shows holdings of assets that are categorized as available for… Read More Solvency management by the denominators
There is lots of talk going on about bank leverage. But how does it look? The plot below shows solvency ratios for U.S. banks (red) and U.S. corporates (blue). It looks different. Note, these are observations for the U.S. over years 1985-2012. Solvency is defined as accounting equity divided by total assets. Graphs are made… Read More Leverage of U.S. Banks and Corporates, a graph.