The press release for the most recent UK financial policy committee is interesting: In today’s Report we draw attention to three reasons that lead us to think that UK banks’ capital ratios – and hence the buffers available to absorb unexpected losses – are currently overstated. First, expected future credit losses may be understated; second, [...]
From a lovely post by J. Brad Hicks (HT Naked Capitalism): These days, only a few guys (other than old guys) bet on the ponies, but just about everybody bets on the stock market. You take your money to the stock market, and you want to bet it on a winning stock. But you have [...]
Don’t worry, I’m talking to myself about slightly risque puns based on FICC. You see, Citi research has an interesting view of the state of FICC: The result for subscale franchises is withdrawal. Here’s their eloquent illustration of UBS’s current capital usage and their plan:
From a speech by David Bradbury, Australian Assistant Treasurer: I believe there is a strong public interest in drawing attention to practices that have the potential to undermine the future sustainability of Australia’s corporate tax base… Governments are discovering the lack of effectiveness in the digital age of international tax concepts created for the industrial [...]
An article from a little while ago about a speech by Michael Cohrs, a former Goldman Sachs banker who now sits on the Financial Policy Committee, has one good idea. He suggested that “too big to fail” banks should be forced to pay “penalties or taxes to create insurance funds” to be used to cover [...]
Jonathan Meades has a hilarious review of the new Bomber Command Memorial at Hyde Park Corner in the LRB. His altogether apposite demolition of the building – in word if not deed – reminded me of how long it has been since we did classicism well, as here:
Reporting OTC derivatives to trade repositories is one of the unequivocally good parts of post-crisis legislation. Such reporting is vital for regulators to have a complete view of the market. It is therefore perhaps no surprise that, as Bloomberg reports CME Group Inc. (CME), the world’s largest futures market, sued the U.S. Commodity Futures Trading [...]
As it turns out, a few miles from Belfast:
It is perhaps to my discredit that I don’t have the interest, stamina, or bloody mindedness to go through Taleb’s technical papers (HT FT Alphaville*). Still, a glance at them and hefty dose of imagination quickly gave me what I think he might mean in the first few pages, at least from 50,000 feet. The [...]
Like many, I am reading the FSB report on shadow banking. The most important issue here is the fifth workstream, securities lending and repo — yet the proposals seem, well, a little bland. Here are the suggestions in brief: Improving regulatory reporting Improving market transparency Improving corporate disclosures Improving reporting by fund managers to end-investors [...]
I can feel winter gathering, waiting for its moment to pounce. There will be snow before this is over – which has to be a good thing. (Mind you, if this was your stadium, you might not feel so good about the snow. There are times when you really do have to go out and [...]
I’m not sure I entirely agree with Golem XIV, but I have to say that the guy has a nice turn of phrase. Consider this: Risk is the pollution created by the process of making money. He also picks up on something from Basel that I had missed, a note from the March quarterly on [...]
Bloomberg has an interesting story on the Danish FSA’s pursuit of mis-stated financials at banks: Denmark’s financial regulator is warning the country’s banks that an understatement of lending risks won’t be tolerated as it embarks on a hunt to catch what it’s dubbed “backdoor” capital dilution. The Financial Supervisory Authority will review internal rating models [...]
I think Matt might be the best journalist writing about the capital markets at the moment. Read this on some recent Bank of America/MBIA shenanigans: it’s well-informed, novel, and funny. He is an ex-equity derivatives guy and it really shows in his understanding of what’s important and how to explain it*. *Plus I have an [...]
I have been reading a useful and timely report on enhancing bank risk disclosures. Their objectives are sensible, and seven fundamental principles are suggested: Disclosures should be clear, balanced and understandable. Disclosures should be comprehensive and include all of the bank’s key activities and risks. Disclosures should present relevant information. Disclosures should reflect how the [...]
Robert Reich has a prescription for closing the $4T US budget deficit: go back sixty years when Americans earning over $1 million in today’s dollars paid 55.2 percent of it in income taxes, after taking all deductions and credits… go back sixty years when Americans earning over $1 million in today’s dollars paid 55.2 percent [...]
From Umesh Vazirani’s Quantum Mechanics and Quantum Computation on Coursea:
First, from Bloomberg: Countries may face sanctions if they fail to implement new rules aimed at safeguarding the global banking system from another financial crisis, a senior Mexican finance official said… Juan Manuel Valle, head of banking supervision at the Mexican Treasury, said no country had suggested a delay but any that failed to meet [...]
Some people seem not to understand why it is a bad idea for a regulator to want to reduce the size of a market. It’s simple: there is enormous moral hazard in that. Suppose politicians say something is illegal, and legislate. Then you can’t do it any more. That’s clear, but it is NOT what [...]
In July 2011: Dexia was subject to the 2011 EU-wide stress test conducted by the European Banking Authority… As a result of the assumed shock, the estimated consolidated Core Tier 1 capital ratio of Dexia would change to 10.4% under the adverse scenario in 2012… the results determine that Dexia meets the capital benchmark set [...]
This is from a few years ago – I can’t even remember how I did the manipulation (yes, Victoria, you should always use adjustment layers in Photoshop so that issue does not arise), but I came across it again this morning and liked it. By the way, there will be a couple of three star [...]
First, and most important, congratulations to the folks to the West on their good judgement. Obama was unimpressive in his first term, but the alternative was plain scary. Maine and Maryland voted for gay marriage, Washington and Colorado for legal pot, and Elizabeth Warren was elected which should make for interesting Senate banking committee hearings. [...]
Some things are surprising. The zombie apocalypse, say, or Gretchen Morgenson writing a well-informed column. Luckily it’s the second of these that the weekend saw. She very helpfully links first to an excellent presentation from Robert S. Steigerwald of the Chicago FED on FMU Recovery and Resolution, and secondly to a letter from the CME [...]
Oh my, this is delicate. There are roughly €80bn of Spanish 18-month T-bills posted as collateral at the ECB, of which around €66.5bn are apparently ‘essentially second-class’. It seems that the ECB rated these as “low A,” even though they should have been labelled B, in line with ratings given by major agencies such as [...]
An interesting observation from Steven Davidoff, who has been reviewing what was actually in the Abacus documentation: Sophisticated investors are supposed to read the documents. We all know that retail investors don’t often take the time to read disclosure, but the securities laws are based on the idea that information is filtered into the markets [...]
Some friends visited yesterday and we tried the Emirates airline for the first time. Interesting views. One interesting thing about suddenly having hundreds of thousands of tourists passing over them is that it has clearly made some businesses clean up their yards. Look how neat this is:
From the Economist: In Britain, the monetary base is 334% higher than it was six years ago, reserves at the central bank are 909% higher but broad money is only up 47% and bank lending to the private sector has risen just 31%, In other words, the money multiplier has collapsed. So how can central [...]
… by Philippe Bacchetta and Eric van Wincoop in the Monetary Authority of Singapore Macroeconomic Review is worth reading. You can find it here. (HT FT Alphaville, Bloomberg) The key point: Macroeconomic fundamentals have a dual role in our theory. One is a standard role, where, for example, a deterioration of a fundamental variable reduces [...]
