“He is the problem.” the investment banker said on a sunny afternoon some weeks ago over a plate of Shed 5 fish & chips. I agreed, it’s the governance of the process, or the lack thereof, that puts the capital plans of the Reserve Bank at risk. The investment banker had spent the entire Christmas… Read More The Governance of the Reserve Bank Capital Plans
Just the other day, the Dutch government announced plans to end the favorable tax treatment of CoCo securities. From 1 January 2019 onward, the tax deductibility of the coupon paid on Additional Tier 1 capital instruments will end.  See a Google translation of the announcement here. Such a change in tax treatment likely constitutes a Tax… Read More European Commission slaps Dutch government on the wrist: the end of AT1 coupon tax deductibility?
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
Last week, the UK Prudential Regulation Authority (PRA) published a consultation paper on group policy and double leverage, in which the PRA wants to limit the risks arising from excessive double leverage. The consultation paper and the associated speech by Sam Woods received some coverage, though the ECM addendum on Non-Performing Loans probably attracted more… Read More Double leverage, a regulatory tribulation
Kiwibank’s capital cock-up took an unexpected turn this week when the bank made another extraordinary announcement. On Friday, the bank let us know that its parents will bail out the bank with an infusion of $247 million of common equity. Sheesh, I thought only Italy did bail-outs! Infusing equity capital is the last thing a… Read More Kiwibank puts its money where its mouth should be
On 15 March, New Zealand Kiwibank issued two odd statements regarding their Basel III compliant (or is it compliant) capital instruments. The announcements raised the prospect of disqualification of two capital instruments: the Tier 2 convertible subordinated bond issued on 6 June 2014 (Tier 2 Bond); and the Additional Tier 1 perpetual bond issued on 27 May… Read More Free rider problems and tax bills? The Kiwibank capital cock-up
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… Read More The EBA Stress Test Data in Handy Format
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… Read More That feeling when you notice that EU leverage ratio requirements are at risk
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… Read More Is the European Commission phasing out MREL?