Prudence comes to risk weights near you

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, […]

Speakeasy segregation

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 […]

No really you mustn’t

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:

Ozzie good sense

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 […]

Capturing `hard to resolve’

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 […]

Classical orders revisited

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:

CME don’t want to say

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 […]

Where to find CCP financial resources

As it turns out, a few miles from Belfast:

What Taleb might mean

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 […]

Wot about repo?

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 […]

Benchmarking the snow

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 […]

Pollution controls

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 […]

Capital doesn’t matter if valuations are wrong

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 […]

In praise of Matt Levine

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 […]

Enhancing the Risk Disclosures of Banks

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 […]

Reich is right

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 […]

Best logo for a quantum mechanics course ever

From Umesh Vazirani’s Quantum Mechanics and Quantum Computation on Coursea:

Basel III, twice

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 […]

Moral hazard 101

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 […]

Dexia – another awkward result

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 […]