Do Regulatory Bank Capital Adjustments actually work?

This recent social science research network paper (A primer on regulatory bank capital adjustments) examines regulatory adjustments. These are adjustments that banks apply to book equity to calculate Tier 1 regulatory capital. The paper, relying on U.S. data, documents a decreasing relation between regulatory adjustments and bank solvency. Specifically, low solvency banks benefit from regulatory… Read More Do Regulatory Bank Capital Adjustments actually work?

EBA advises Europe to overturn Basel III rule on unrealized gains

Among the many publications that the EBA posted on its website last week, the Technical advice to the Commission (EC) on the treatment of unrealized gains deserves attention. Not only because of its content, but also because of the clarity, depth, and breadth of covering the issue of unrealized gains. Here is the context: EBA’s advice… Read More EBA advises Europe to overturn Basel III rule on unrealized gains

Even better: EBA presents its EU-wide Transparency Exercise Results

Adding to my backlog of actions to comment on, EBA parcels out one interesting feature after the other. It just posted the results of the EU-wide transparency exercise. It provides updated information on the European banks that were part of the recapitalisation exercise in 2012. The information covers data on banks’ composition of capital, composition… Read More Even better: EBA presents its EU-wide Transparency Exercise Results

EBA leans against Basel III in excluding unrealized gains from Regulatory 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

IASB’s stance on AOCI Discussion Paper on the new Conceptual Framework

A large document for sure, and relevant, as accounting is the prime source of capital values. Shaun Drummon of AFR notices the Board’s stance on AOCI: “One of the most controversial has been the liberal use of other comprehensive income (OCI), otherwise known as the reserve, in revisions to accounting rules to park movements in… Read More IASB’s stance on AOCI Discussion Paper on the new Conceptual Framework

More AOCI bashing

Banks again blame the accounts for their own abysmal performance. More worryingly is the way the press reports on this. See Business Report writing it up: Wells Fargo and JPMorgan Chase, the most profitable US banks, lost $6.5 billion in combined equity in the second quarter as rising interest rates and falling bond prices threaten… Read More More AOCI bashing