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?
Lots of twitter-folks, especially law shunning economists, have only a slight clue as to what the Basel III implementation in Europe actually entails. So, here’s my briefings on Basel III. Note, I write this post as an economist, who, after a decade of academia subjected himself to five years of a regulators’ commitment to help… Read More Basel III’ is Europe – Part I
There is a vibrant debate going on regarding convertible capital or coco’s, see for example this recent paper from the U.S. treasury. On first sight a coco looks great. In going concern there is a tax advantage for the issuer. And when the issuer’s viability starts deteriorating, cocos may help lower the probability of default.… Read More Convertible Capital Hurdles
This week ING revealed its plans to spin off its Korean insurance unit, see this link from Bloomberg. This made me wonder how this bank-assurer would fare under the current capital rules for conglomerates. The current Fico Directive is clear: ” … the multiple use of elements eligible for the calculation of own funds at… Read More EU conglomerate capital rules expose ING’s weak group capital
EBA yesterday published a Discussion Paper (DP) on the exclusion of unrealized gains from regulatory capital. As an advice to the European Commission it basically supports the current European system of prudential filters – that is, only the unrealized gains part (banks will have to include unrealized losses into capital). EBA’s departure from Basel III… Read More EBA leans against Basel III in excluding unrealized gains from Regulatory Capital
This is complicated material. But … looking at Article 9 of this standard, the bar for recognition of supplementary capital looks high. Even though it applies after the entry into force of Regulation (EU) No 575/2013 (CRR) and only when both CRR and Solvency (2009/138/EC) apply. The requirements are stacked up high! Article 9 says basically this: a solvency… Read More ESA’s tough final Regulatory Standards on conglomerate capital are out.
The EBA published the first final draft technical standards on own funds. Its actually a bundle that complements CRR IV, the new European regulation on capital. Haven’t had the time to digest fthe final versions, but there are four pieces, according to the EBA website: The RTS on own funds part I specify elements of… Read More Jay! EBA publishes first final draft technical standards on own funds.
I’m following up on my post yesterday of the EBA initiative to preserve nominal amounts of bank capital. I noticed that EBA wants to monitor this preservation initiative by requiring individual banks to hand over capital restoration plans. Now the US too wants access to bank data, reports the FT. This further compromises the autonomy… Read More US sides with EBA on Bank Data Sharing
Today the EBA made an announcement that requires banks to hold nominal amounts of capital over amounts previously set out in a recommendation set out a year ago. When banks’ capital levels fall below the nominal floor, they will have to present credible plans for restoration. This looks like a novelty, as banks are used… Read More EBA requires banks to hold Nominal capital levels
Matthew Attwood in Financial News reports on the difficulties that European banks face when replacing pre-crises capital instruments by Basel III compliant instruments. This was a small disaster waiting to happen, as Bazel III rules made it clear, pretty much from the outset, that it wanted to see the back of “old-style” instruments sooner rather than… Read More Europe’s painful phase-out of old-style capital instruments