Commerz lays bare market over-optimism on EU banks

August 2, 2016

The German bank says negative rates will further weigh on revenues. Investors are already braced for low returns: Commerzbank trades at 0.3 times book. Still, with analysts' earnings forecasts almost twice those assumed in the EU stress test, even more caution is warranted.

Banks can’t rely on lifeboats when Titanic sinks

April 13, 2016

JPMorgan is among five big U.S. firms that failed the living wills test. That’s because they counted on liquidity from other subsidiaries that could be cut off from providing aid when things go awry. The regulators’ message to Wall Street is clear: every man for himself will prevail in the next crisis.

Federal Reserve playing with fire on bank capital

February 18, 2016

The watchdog is allowing Capital One to buy back more stock than initially permitted under Dodd-Frank stress tests. It’s good news for lenders aiming to exploit recent stock drops. But it singes the central bank’s reputation for toughness in ensuring banks keep adequate cushions.

Fed stress-tests idea of negative interest rates

February 2, 2016

That’s part of the “severely adverse” scenario that big U.S. banks have to run this year to satisfy regulators. The ECB and now the Bank of Japan are giving it a try. The Fed has started pushing rates upward – but going negative is becoming a very plausible downturn assumption.

Stress test implies end to UK bank capital hikes

December 1, 2015

No institution failed the Bank of England’s 2015 exam, though RBS and StanChart missed on some metrics. The regulator also thinks capital ratios are only a little short of what’s needed in the longer term. That implies some lenders can pay higher dividends from their earnings.

Rob Cox: Banks can now prep for even tougher exam

By Rob Cox
March 12, 2015

After a stressful week of stress-testing, U.S. mega-lenders might want to kick back and earn some money. If only it were so easy. They’ve mostly proven they can weather a flood, but not yet a break in the levee. That comes next with the Fed and FDIC resolution requirements.

Cash calls misstate likely EU bank equity deficit

July 3, 2014

The first half of 2014 saw a spate of European bank share sales ahead of stress test results this autumn. It would be wrong to conclude that all the new equity will go to plug a capital hole. Some lenders are being preemptive, some are just cautious.

Credible EU bank tests need a higher pass mark

October 6, 2011

Europe’s banks may need to re-sit their summer exam. Regulators are looking for ways to inject more capital into the region’s troubled lenders. One potential quick fix is to use the same data as in July’s discredited stress tests, but impose haircuts on sovereign debt.

Fed strikes right balance with latest stress test

March 13, 2012

Unlike the last look under the hood, investors have been given reams more useful data to separate sheep from goats in U.S. finance. At the same time, the Fed’s acting prudently to ensure capital adequacy across the system. It’s a sensible way to head off another financial crisis.

Bank stress tests renew dividend-buyback debate

March 14, 2012

JPMorgan and Wells Fargo are doing both after passing the Fed’s exam with flying colors. But in an industry suffering from slow growth, increasing the dividend payout ratios back to, if not above, 2007 levels may make more sense for shareholders than repurchasing stock.