This week and the last, the Reserve Bank of New Zealand published two speeches discussing the strength of our financial system. It has been a while that I heard Geoff Bascand and Toby Fiennes on this topic, their speeches were as welcome as they were overdue. Geoff encouraged banks to be courageous. To support the… Read More Balls please, no horses
And what does it mean for one bank in particular? Last week, audit firm KPMG published its quarterly Financial Institutions Performance Survey (or FIPS). It featured the deteriorating profitability of New Zealand’s banks. Bad news of course, and the New Zealand financial press quickly jumped on the survey. Radio New Zealand printed a headline sporting… Read More Eyes Wide Shut: Did Bank Capital Grow under RBNZ’s Governor Orr?
An evaluation of RBNZ’s hybrid capital securities Will the RBNZ’s latest innovation on bank capital, the Redeemable Perpetual Preference Shares, contribute to more and better bank capital? The analysis below casts doubt on the success of RBNZ’s attempt to help New Zealand banks to issue capital at a low cost. A victim of its own… Read More Political Tier 1 Capital: PT1
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 …
Yesterday, the RBNZ announced the release of submissions on the last capital review paper. A whopping 161 submitters shared their views on the Reserve Bank’s capital proposals. This is significant for sure. It also confirms how interesting bank capital regulation is! I quickly found my own contributions. Three this time, but I wonder why the… Read More The international financial institution that the RBNZ ignored
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?