Group items tagged

three-pronged reform agenda

capital plan

capital holes

it would be somewhere between €100bn ($137bn) and €200bn.

the plan needs to change

forced to meet the planned 9 per cent core tier one capital ratio in such a short time

determined not to raise fresh money – either from shareholders, because equity prices are so disastrously low, or from the state, because of an understandable fear of being stigmatised as a bailed-out bank that is weaker than its rivals

they would shrink their balance sheets, reducing the risk-weighted assets (or lending commitments) that form the denominator of their capital ratios, rather than boosting the capital that forms the numerator.

shrinkage of available bank credit across Europe

protesting about the lack of funding.

politicians and small business

the banks are bluffing

There is a strong reason to call their bluff

second prong

that will not be enough

normalise banks’ access to liquid funds in the bond markets.

Dexia,

often not insufficient capital that kills a bank (Dexia’s ratios were top-notch) but a lack of liquidity

short-term funding and long-term lending commitments proved fatal.

International regulators

come up with a new measure

the net stable funding ratio

will limit profitability and the banks have protested. But it should happen.

there needs to be a quick fix, too

there has been no issuance of bank bonds

Only with a temporary guarantee from a European Union vehicle can bond markets be reopened.

policymakers need to tackle the root cause of the problems in the periphery – namely, their budgetary mismanagement.

Silvio Berlusconi

must be ousted by the Italian people

entirely within the gift of those preparing for the weekend summit.

first two reforms

brave political calls, laying policymakers open to accusations of handing money to bankers again

the lesser of two evils

accompanied by an enforceable regime of business lending commitments

normal rules of capitalism have already been suspended. We should stop pretending otherwise and make the necessary intervention quickly and decisively

few now expect anything better from our banks.

Barclays

Much has been written about culture and values in banking.

our banks have become degenerate any less off beam?

Bankers and politicians

roups held in equally low esteem by the public.

could lead to a rule-based industry and codified moral rectitude.

António Horta-Osório, Lloyds’ chief executive, last week called for an end to the sales culture in banking that has driven so many scandals.

Sir John Vickers gave clear recommendations on the industry’s structure,

Anthony Saltz,

ead a review of the bank’s “values, principles and standards of operation”.

Bank boards and executive teams elsewhere know they must respond to such calls.

hold bank boards accountable as custodians of a healthy culture.

he word culture, when applied to banks, is almost always connected to pay – as in “bonus culture” or “culture of greed”

but by good human behaviour and it will be rooted in the legitimate expectations of a bank’s clients, shareholders, regulators and employees – not to mention the needs of society

the strongest source of competitive advantage in future will be how people behave when no one is looking. Organisations made up of talented people with the right values will be most likely to outperform.

reasons for hope

The Vickers commission achieved

political consensus.

provided a stunning $1.2 trillion to large global financial institutions

The money has been repaid

sketchy collateral

surprisingly sketchy collatera

Royal Bank of Scotland received $84.5 billion, and Dexia, a Belgian lender, borrowed $58.5 billion from the Fed at its peak

provided this much assistance to the biggest institutions for so long, and then to have done in effect nothing for the homeowner, nothing for credit card relief.”

Mr. Todd also questioned the Fed’s decision to accept stock as collateral backing a loan to a bank. “If you make a loan in an emergency secured by equities, how is that different in substance from the Fed walking into the New York Stock Exchange and buying across the board tomorrow?”

espouses the principle that all men and women are equal under the law,” Mr. Kane said. “During the housing bubble and the economic meltdown that the bursting bubble brought about, the interests of domestic and foreign financial institutions were much better represented than the interests of society as a whole.”

THIS inequity must be eliminated

regulators who have a duty to protect taxpayers should require these institutions to provide them with true and comprehensive reports about their financial positions and the potential risks they involve.

The banks really feel entitled to hide their deteriorating positions until they require life support.

financial regulators are captured by the companies they oversee,

if we do nothing to protect taxpayers from the symbiotic relationship between the industry and their federal minders, we are in for many more episodes like the one we are still digging out of.

EVALUATING bailout programs like the Troubled Asset Relief Program and the facilities extended by the Fed against “the senseless standard of doing nothing at all,” Mr. Kane testified, government officials tell taxpayers that these actions were “necessary to save us from worldwide depression and made money for the taxpayer.” Both contentions are false, he said.

“Thanks to the vastly subsidized terms these programs offered, most institutions were eventually able to repay the formal obligations they incurred.” But taxpayers were inadequately compensated for the help they provided,

Government officials rewarded imprudent institutions with stupefying amounts of free money

the ratio does not formally take effect until 2015,

JPMorgan estimates that 28 European banks faced a total liquidity shortfall

number of members on the Basel Committee

the liquidity coverage ratio is the most “painful” piece of regulation to hit the sector, and will cost European banks nearly 12 per cent of their 2012 earnings on average

expected 5 per cent hit from tougher global requirements on bank capital, and a 3 per cent reduction from the Dodd-Frank financial reform measures in the US.

“Regulatory focus is rapidly shifting from capital at risk to liquidity risk in our view,”

Only seven of the 28 banks tested met the enhanced standards,

want to soften key technical definitions in the ratio

effect of reducing how much liquidity banks have to hold, and would allow them to count more corporate and covered bonds toward the total

The committee staff,

gathering data on the potential impact of the ratio, and a subgroup is working on the definitions ahead of a full committee meeting this month

US and continental European

regulators are expected to push for changes that would ease the impact on their banks,

support the status quo