Banks & Interest Rates Archives - Page 42 of 62

May 6, 2013

Are Australian banks really sound?

In a statement APRA chairman John Laker said that, in implementing the Basel III liquidity reforms, the authority’s objectives were to improve its ability to assess and monitor ADIs’ liquidity risk and strengthen the resilience of the Australian banking system.

“APRA believes ADIs are well-placed to meet the new liquidity requirements on the original timetable and doing so will send a strong message about the soundness of the Australian banking system,” he said.

If you repeat misinformation often enough, people will believe it is true. Australian banks face two risks: liquidity risk and solvency risk. Addressing liquidity risk does not address solvency risk. Australian banks report risk-weighted capital ratios which are misleading if not downright dangerous. Risk-weighting encourages banks to concentrate exposure in areas historically perceived as low risk, such as residential mortgages. When all banks are over-weight the same asset, the risk profile changes — as Eurozone banks discovered with government bonds.

If we remove risk-weighting, as proposed in the US Brown-Vitter bill, the four majors in Australia would have capital ratios of 3 to 4 percent. Not much of a capital buffer in these uncertain times.

May 4, 2013

The insufferable conceit | MacroBusiness

Sell on News at Macrobusiness observes:

Columbia University economist Jeffrey Sachs recently commented that the financial system is plagued by large scale fraud. He blamed it on a docile president, a docile White House and docile regulators……..

Sachs is right in his observations, of course. But I am not sure he is right to imply that it is new. I think Greed and Wall Street have been bedfellows as long as Wall Street has existed.

May 4, 2013October 5, 2017

Blame del Pont for the nightmarish rise in Argentine inflation | The Market Monetarist

Lars Christensen cites MercoPress on hyper-inflation in Argentina:

Because of inflation, people collect their salaries and rush to turn them into foreign currency”, added the money traders…

He observes:

The collapse of the peso should be no surprise to anybody who have studied Milton Friedman. Unfortunately Argentina’s central bank governor Mercedes Marcó del Pont hates Milton Friedman, but she loves printing money to finance public spending.

May 2, 2013

David Vitter discusses bipartisan bill to end Too-Big-To-Fail | CNBC [video]

Senator David Vitter (R-La) along with Senator Sherrod Brown (D-Ohio) is launching an effort to increase capital requirements for big banks and remove risk-weighting of assets as proposed under Basel III.

May 2, 2013

End Too-Big-To-Fail | Sen. Sherrod Brown [video]

Sherrod Brown (D-Ohio), along with unlikely ally Sen. David Vitter (R-La.), is launching an effort to increase capital requirements for big banks and remove risk-weighting of assets as proposed under Basel III.

May 1, 2013

In Brown-Vitter Bill, a Banking Overhaul With Possible Teeth | NYTimes.com

Jesse Eisinger from ProPublica skewers big banks’ objections to increasing capital buffers as proposed by the bipartisan Brown-Vitter bill:

Goldman Sachs and S.& P. estimate the big banks might be forced to raise $1 trillion or more. That’s a lot, so much that the leviathans’ agents cry out that they couldn’t sell that much stock. But they don’t have to raise it all at once. And they can retain their earnings and stop paying dividends in addition to selling shares.

In putting that argument forward, they don’t realize they make Senator Brown’s and Senator Vitter’s case for them. If investors are so terrified of the big banks that they won’t buy their stock, that’s a terrific problem. Most of the big banks trade below their net worth, an indication that investors don’t trust them. Brown-Vitter might actually help banks by restoring that trust.

May 1, 2013

Fed sticks to stimulus plan, worried about fiscal drag | Reuters

Pedro da Costa and Alister Bull at Reuters write:

The Federal Reserve stuck to its plan to buy $85 billion in bonds each month to push down borrowing costs and prop up the economy, citing risks to growth from recent budget tightening in Washington.

April 30, 2013

How Wall Street Defanged Dodd-Frank | The Nation

Gary Rivlin gives us an insight into the machinations of Wall street lobbyists on Capitol Hill:

As he prepared to sign the Dodd-Frank Wall Street Reform and Consumer Protection Act—the sweeping legislative package designed to prevent another spectacular financial collapse—into law, the president [Obama] first acknowledged the miracle of having a bill to sign at all. “Passing this…was no easy task,” he told the crowd of hundreds. “We had to overcome the furious lobbying of an array of powerful interest groups and a partisan minority determined to block change.”

Indeed, some 3,000 lobbyists had swarmed the Capitol in hopes of killing off pieces of the proposed bill……

That sense of victory barely lasted barely the morning. …..After Dodd-Frank’s passage, lobbyists for the big banks and industry trade groups divided themselves into eighteen working groups, each organized around a different element of the new law. “That’s when the real work began,” Talbott tells me……

April 30, 2013

Eurozone risks Japan-style trap as deflation grinds closer | Telegraph

Ambrose Evans-Pritchard reports:

The region’s core inflation rate – which strips out food and energy – fell to 1pc in March. This is far below expectations and leaves monetary union with a diminishing safety buffer. “The eurozone is tracking the experience in Japan in mid-1990s. There is a very high risk of a slide into deflation,” said Lars Christensen, a monetary theorist at Danske Bank.

April 29, 2013

Deutsche Bank Plans Capital Boost | WSJ.com

A welcome development reported by LAURA STEVENS , DAVID ENRICH and ULRIKE DAUER at the Wall Street Journal:

FRANKFURT–Deutsche Bank AG [DBK.XE] said Monday it will raise €2.8 billion ($3.65 billion) in fresh capital in a dramatic about-face for the bank, which has repeatedly said it won’t turn to shareholders for help boosting its capital cushion.

The bank, Europe’s second-largest by assets, has long faced doubts from investors and analysts about whether it has enough capital to absorb potential future losses and to meet increasingly stringent regulatory requirements……

Deutsche Bank has long been considered thinly capitalized but have always countered with the argument that the leverage is justified by the quality of the assets on their balance sheet. Low risk-weightings provided a false sense of security, with Greek and other PIIGS government bonds rated as zero-risk in the past, encouraging banks to leverage up on precisely the wrong kind of assets. It is time for risk weightings to be removed from bank capital ratios. The bipartisan bill sponsored by US senators Sherrod Brown and David Vitter is a step in the right direction.