The European Commission’s proposal to accelerate the reduction of non-performing loans

This week the EC presented concrete steps to tackle non-performing loans, see this page. Ouch One and Ouch Two Two reasons why this is an interesting proposal. First, it forces banks to deduct any provisioning shortfalls directly from Common Equity Tier 1. Ouch! Second, the proposal amends the CRR, which is a Regulation. And we… Read More The European Commission’s proposal to accelerate the reduction of non-performing loans

March 15, 2018March 15, 2018 @cetier1

No battle plan survives first contact with the enemy

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

January 29, 2018 @cetier1

Fifty shades of green bank capital

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

January 4, 2018 @cetier1

Double leverage, a regulatory tribulation

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

October 11, 2017November 26, 2018 @cetier1

Comments on RBNZ’s second capital review paper: What should qualify as bank capital?

The RBNZ wants to redefine capital. My comments are below. In short: don’t let perfection be the enemy of the good. The RBNZ runs the risk of achieving just what it does not want by going it alone. A DIY-definition of capital makes the Reserve Bank vulnerable to structuring. Moreover, the problems signalled by the Reserve… Read More Comments on RBNZ’s second capital review paper: What should qualify as bank capital?

September 5, 2017 @cetier1

Kiwibank capital flip-flop

About a fortnight ago Kiwibank announced that its formerly disqualified capital instruments now re-qualify as capital. Yay! This after a the capital disqualification event on which I wrote not so long ago. There was almost no press coverage of the re-qualification. Yes, there was NBR’s Jenny Ruth who wrote a noisy and non-informative story on the… Read More Kiwibank capital flip-flop

August 28, 2017December 30, 2017 @cetier1

RBNZ decides on Kiwibank cocos – uh oh

No surprise here: the RBNZ decided to render two cocos ineligible for regulatory capital purposes. This is what Kiwibank reported yesterday. The holders of the instruments likely will keep their coupon, at the expense of the cash flows accruing to Kiwibank. The reason for derecognising the instruments remains a bit of a puzzle: RBNZ “has… Read More RBNZ decides on Kiwibank cocos – uh oh

May 30, 2017 @cetier1

Kiwibank puts its money where its mouth should be

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

April 8, 2017 @cetier1

Free rider problems and tax bills? The Kiwibank capital cock-up

On 15 March, New Zealand Kiwibank issued two odd statements regarding their Basel III compliant (or is it compliant) capital instruments. The announcements raised the prospect of disqualification of two capital instruments: the Tier 2 convertible subordinated bond issued on 6 June 2014 (Tier 2 Bond); and the Additional Tier 1 perpetual bond issued on 27 May… Read More Free rider problems and tax bills? The Kiwibank capital cock-up

March 25, 2017 @cetier11 Comment

Sovereign Holdings by EU Banks

The EBA just published the results of the 2016 transparency exercise. Yay! The EBA decided to deliver on its promise to present more detailed data of individual banks. (I hope the EBA now forgives me for posting a critical note on their bank disclosure plans earlier this year.) I toyed a bit with the data… Read More Sovereign Holdings by EU Banks

December 4, 2016 @cetier1

Capital Issues

The ambitious attempt to clarify the World of Regulatory Bank Capital