European Commission slaps Dutch government on the wrist: the end of AT1 coupon tax deductibility?

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. [1] 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?

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

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

Five years after the first Basel III coco issuance, the Netherlands “gets” CoCos.

Uh oh, Jeroen Dijsselbloem form the Netherlands got into rough water this week: Dutch newspaper NRC had a nice scoop that showed how he relied on ING word smiths for writing a tax rule that renders bank capital instruments (CoCos) tax deductible, see full freedom of information documentation here. How bad is this? End 2013,… Read More Five years after the first Basel III coco issuance, the Netherlands “gets” CoCos.

Basel’s damning report about EU’s definition of bank capital

Here is the Basel III RCAP report. On first sight, it looks bad: “In view of this, the prudential regulatory framework in the EU and the nine Member States was evaluated to be materially non-compliant with the minimum standards prescribed under the Basel framework.” However, how bad is it? Having skimmed trough the report with… Read More Basel’s damning report about EU’s definition of bank capital

The Italian DTAs

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

Tight new rules for EU conglomerate solvency calculations are official

Following on from an earlier post on conglomerate capital rules, the EU now made the conglomerate rules official. This is EU’s answer to criticism on its watered down implementation of Basel III. But it may never become clear why the EU uses conglomerate rules to compensate for weaknesses in bank rules. It looks like a costly… Read More Tight new rules for EU conglomerate solvency calculations are official