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
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?
A short note on the outcome of the RBNZ capital plans Today, the RBNZ posted its final capital plans – well, they still need to be finalised, but for the Christmas holidays this will do. In fairness, I see no reason not to commend the RBNZ for their decisions on capital. See the summary cheat… Read More On olive branches and olive trees
“You guys are little bit philosophical: the Netherlands and France are the only two countries in Europe that haven’t taken a position on capital requirements.” That was Emil from Nomura, who, in early 2012, queried me about the Dutch position on minimal capital requirements. The Swedish bank authorities had just announced that capital ratios should be… Read More Has the reserve bank become too philosophical about bank capital?
Once in a while I meet bankers and bank regulators, sometimes over a cup of coffee, sometimes over a glass of Pinot Noir. In fact, I will attend an event with RBNZ’s Adrian Orr tomorrow. He will speak at the brand new PwC centre in Wellington. When it comes to bank capital, the narrative shared… Read More When will the RBNZ admit its capital ratio definitions are bent? (And copy APRA’s plan to straighten them?)
This week the EC presented concrete steps to tackle non-performing loans, see this page. Ouch One and Ouch Two Two reasons why this is an interesting proposal. First, it forces banks to deduct any provisioning shortfalls directly from Common Equity Tier 1. Ouch! Second, the proposal amends the CRR, which is a Regulation. And we… Read More The European Commission’s proposal to accelerate the reduction of non-performing loans
In March 2009, the International Accounting Standards Board started an ambitious plan to make accounting for banks easier to understand. In no less than 97 pages, the IABS laid out its plan to reduce complexity in the reporting of financial instruments.* At the time, the IASB did the right thing. The standard in force was too complex.… Read More No battle plan survives first contact with the enemy
This week the Financial Times reported on a strange initiative of the European Commission. Its vice-president Valdis Dombrovskis spoke favourably of the introduction of a “green supporting” factor for banks that invest in green assets. Green is hot, especially on a planet that gets warmer by the day.* So, yes, offering green bank capital relief looks like… Read More Fifty shades of green bank capital
The RBNZ wants to redefine capital. My comments are below. In short: don’t let perfection be the enemy of the good. The RBNZ runs the risk of achieving just what it does not want by going it alone. A DIY-definition of capital makes the Reserve Bank vulnerable to structuring. Moreover, the problems signalled by the Reserve… Read More Comments on RBNZ’s second capital review paper: What should qualify as bank capital?