RBS puts lipstick on Citizens for $14 bln IPO

September 8, 2014

The Scottish bank reckons cost cuts, rising interest rates, capital returns and more business will boost its poorly performing U.S. unit. Granted, all this might create decent enough returns to justify the price. But RBS is painting too pretty a picture of Citizens’ independence.

Review: “House of Debt” diagnosis beats remedies

June 13, 2014

Atif Mian and Amir Sufi make a compelling case that excess consumer debt caused the U.S. Great Recession’s severity, but their mortgage bailout proposal would make matters worse. Their shared value mortgages might help, but old-fashioned tight money is a simpler and better way.

Detroit turns bankruptcy precedents upside down

March 11, 2014

Motown’s plan for restructuring $18 bln of debt envisions paying equity holders – i.e. ordinary Detroiters – at the expense of secured creditors. This shareholder-friendly approach might save the city, and make Judge Rhodes a hometown hero. But markets may yet exact a price.

How capital controls are prolonging Cypriots’ pain

May 27, 2013

After March’s brutal haircut on bank deposits, the island state’s economy will shrink this year whatever happens. But punitive controls on Cypriots’ access to their own money are making things worse. Efforts to stop the rot clash with the need to avoid financial instability.

Bank hierarchy of pain could become a hydra

April 18, 2013

Who should lose money when banks fail? Talk of making deposits senior to bondholders might reassure savers rattled by the Cyprus bailout, and avoid bank runs. But it could lead to unhealthy arbitrage between loans and deposits. Vigilance is needed, and lots of capital.

Cyprus exit risk is real – and manageable

March 21, 2013

The European Central Bank has threatened to cut off Cyprus’ banks if Nicosia doesn’t take a bailout, potentially triggering a euro exit. The ECB has been pragmatic before, and will want the euro to stay intact. But an exit is manageable, and better than having the ECB buckle.

Europe’s bank-run defences have limits

March 18, 2013

The decision to hit insured depositors as part of the weekend’s Cypriot bailout could prompt those in Spain and Italy to take evasive action. If so, the ECB can deploy major liquidity assistance. But a really big run would test the willingness of central bankers to support its use.

Buoyant markets give ECB upper hand in Irish spat

January 28, 2013

The European Central Bank has rejected a plan by Dublin to restructure its bank bailout. Any deal needs to balance the risks of derailing Ireland’s recovery against a breach of its own rules by the ECB. For now, low Irish bond yields give Frankfurt an advantage.

Euro zone gives Greece almost a good deal

November 27, 2012

The stand-off between Greece’s lenders has ended - sort of. The IMF has extracted debt relief from the euro zone, and Germany has avoided a haircut for now. Private creditors will have to agree to take more losses. But at least the deal paves the way for further debt relief.

Greece needs a positive shock

By Hugo Dixon
November 21, 2012

It didn’t get one at the overnight Eurogroup meeting, which failed again to agree on a plan to make Athens’ debt sustainable. While a deal may be struck when finance ministers reconvene next week, it risks being a fudge. The IMF should stand its ground and demand a proper plan.