Today, I submitted my comments on our Reserve Bank’s 4th capital consultation paper. The RBNZ wants banks to meet stiff new capital requirements. For common equity, the ratio requirement will increase by a whopping 5 percent, with a 1.5 percent countercyclical buffer requirement on top. Total capital requirements will be 17 percent. There will be… Read More Are the Reserve Bank capital plans really about conduct risk?
“You guys are little bit philosophical: the Netherlands and France are the only two countries in Europe that haven’t taken a position on capital requirements.” That was Emil from Nomura, who, in early 2012, queried me about the Dutch position on minimal capital requirements. The Swedish bank authorities had just announced that capital ratios should be… Read More Has the reserve bank become too philosophical about bank capital?
Once in a while I meet bankers and bank regulators, sometimes over a cup of coffee, sometimes over a glass of Pinot Noir. In fact, I will attend an event with RBNZ’s Adrian Orr tomorrow. He will speak at the brand new PwC centre in Wellington. When it comes to bank capital, the narrative shared… Read More When will the RBNZ admit its capital ratio definitions are bent? (And copy APRA’s plan to straighten them?)
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
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
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
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?
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
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