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?
Yesterday’s interest.co.nz featured an article summarising the work the RBNZ has done to support our economy. The article shows a long list of actions taken by the Reserve Bank, and yes, it looks impressive. On the other hand, the text appears to serve as a mouthpiece for Assistant Reserve Bank Governor Christian Hawkesby, offers little… Read More On bank capital, what should the RBNZ do now?
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
On 5 December 2019 at 12:01 pm, I received an email from the Reserve Bank of New Zealand. The email announced some important decisions about the Bank’s capital review. As the email contained summary information only, I went to the RBNZ website to get the documents explaining the capital review decisions. Unfortunately, it was impossible… Read More The curious share price movements of four big Oz banks on 5 December 2019
A short note on the outcome of the RBNZ capital plans Today, the RBNZ posted its final capital plans – well, they still need to be finalised, but for the Christmas holidays this will do. In fairness, I see no reason not to commend the RBNZ for their decisions on capital. See the summary cheat… Read More On olive branches and olive trees
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 …
Last week, the RBNZ released the three independent international experts’ assessments of the New Zealand Capital Review. The RBNZ commissioned three international experts in May as part of the bank capital review. The reports by Cummings, Miles and Levine offer interesting views on bank capital. The reports are different in substance and style. However, they… Read More My two cents on Ross Levine’s expert report: deep thinking on incentives, dynamics, and moral hazard.
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
The idea that financial markets are efficient is fascinating. A compelling story about market efficiency is the one about the Space Shuttle Challenger disaster. The Challenger broke apart within minutes after its launch on 28 January 1986. I remember it very well. It was a cold day, I was in Groningen, the Netherlands. I cycled back home… Read More The wisdom of crowds