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?
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
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
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?
Following up on an earlier post, the EC now published the answers on its consultation on long term finance. Thought the topic is hot, only 87 responses were submitted*, of which only two by academics. One by Martin Hellwig, the other by Martien Lubberink. The low public participation by academics is depressing, given that they called… Read More Results of EU consultation on bank financing are out
My post on EU leverage ratios yesterday attracted some comments on twitter, which may haven been triggered by misunderstandings. The CRR offers a short and clear summary of the Leverage Ratio definition in Article 429.1: “The leverage ratio shall be calculated as an institution’s capital measure divided by that institution’s total exposure measure and shall… Read More FYI some documentation on the Leverage Ratio for EU banks
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
Silvia Merler published a great post on the solvency of Greek banks. Though she focuses on CET1 ratios, I just realised that Article 92 of the CRR requires this: 1. Subject to Articles 93 and 94, institutions shall at all times satisfy the following own funds requirements: (a) a Common Equity Tier 1 capital ratio… Read More Greek Banks and Article 92 CRR
This week, the EBA held a public hearing on the 4 May report on AT1 issuances, see my previous posts on this. Click here for the PowerPoint that the EBA prepared. Apparently no surprises. On the hot topic of Contingent Clauses, the EBA reports that it “confirms its previous reserves, and recommends disallowing contingent clauses”.… Read More UPDATE 2: The EBA’s laudable effort to tame Additional Tier 1 issuances