My review of a fascinating book on swaps, derivatives, and Dutch supervisory shenanigans by Hester Bais and Wink Sabée The book by Hester Bais and Wink Sabée documents poor conduct by banks in the Netherlands during the first decades of the century. Warning: for non-Dutch readers, the book is only in Dutch now, but I… Read More ‘Worst Bank Scenario’ a book that should spark a discussion on bank supervision
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
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
Frances Coppola this week posted on her blog an explanation of Capital, liquidity and the countercyclical buffer, in plain English. Frances posted because of Caroline Binham’s use of language in a Financial Times article. Caroline, according to Frances, is wrong. So wrong even that she takes it out on Caroline, blaming her for not being… Read More The language of Capital and Equity
I used the stress test data to compute the gap between the leverage ratio and the risk-weighted ratio (CET1 ratio). The ECB data offers the leverage ratio data inputs. To measure the ratios by country, I used the totals of A3 and A4 for the CET1 ratio and the totals for A3 and A5 for Leverage… Read More EU Leverage Ratio Gap
Today the Wall Street Journal reported on an alleged loophole in EU bank capital rules. The loophole pertains to deferred tax assets (DTAs), a regulatory area where tax rules and accounting rules meet. Apparently some countries exploit a DTA loophole: Italy, Spain, Portugal and Greece. Uh oh, these countries, the usual suspects. There is something really wrong here.… Read More The Italian DTAs
With Matt Levine I share the fascination for the deal that featured in last week’s This American Life and in Propublica. I also wonder why actually this deal would be shady, as the Propublica story wants us to believe. Though Matt does a fair amount of explaining, the deal involves a simple transaction, recorded by two one journal entry. It… Read More How shady actually was the Santander-Goldman deal?
Today both the EBA and the Basel committee published their Basel III monitoring reports. These reports measure the progress banks make regarding the implementation of the new bank capital rules. The results look encouraging, banks have added capital since the April 2009 G20, shortfalls are lower than before, and not near the voodoo stories… Read More Bank capital on track
Despite extensive press coverage, I struggled in finding the prospectus of CBA’s PERLS VII Capital notes. One email to CBA prompted a quick response: voilà here is the prospectus – packed with warnings.
Last week, the three European financial regulators warned financial institutions that they should tread carefully when it comes to marketing CoCos: capital securities that may convert or be written off when a bank gets into trouble. The warning may have been prompted by the failure of UK’s Co-operative bank or Dutch bank SNS. These failures bailed-in… Read More Caveat emptor? We should probably do more than tell banks how to sell CoCos.
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