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
Tomorrow at noon, the RBNZ will reveal its bank capital plans. After many years, the RBNZ will likely decide to increase capital requirements to 17 percent for all banks, with a 1 percent add-on for systemically important banks. Having contributed to capital rules for the Basel Committee and the European Union, for me, most of… Read More RBNZ's capital proposal, the grand finale …
The Bank of England stress test results are out. A comprehensive report covering this exercise can be found here. The report surprised me a bit, because its repeatedly mentions the countercyclical capital buffer requirement. The BOE decided to keep at 1 percent. Hardly newsworthy, that percentage was announced a year ago. Still, the report mentions… Read More Are UK’s countercyclical capital buffers high?
“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?
In a couple of weeks’ time, at the FEBS conference in Rome, Stefan Kerbl and Zsofia Döme from the Austrian national bank (OENB), will present a paper on the comparability of Basel risk weights in the EU banking sector. The short story: according to Stefan and Zsofia there are significant differences in the ways European… Read More How questionable is the comparability of Basel risk weights in the EU banking sector?
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
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?
The EBA just published the results of the 2016 transparency exercise. Yay! The EBA decided to deliver on its promise to present more detailed data of individual banks. (I hope the EBA now forgives me for posting a critical note on their bank disclosure plans earlier this year.) I toyed a bit with the data… Read More Sovereign Holdings by EU Banks
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