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Rob Cox: Banks can now prep for even tougher exam

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.

Fed’s Citi logic is hard to follow

March 15, 2012

The bank narrowly failed its stress test. Reconciling the results with the balance sheet suggests it tried to give too much back to shareholders. But loss assumptions also were higher for Citi than most rivals. From the data available, it’s tough to make the Fed’s numbers add up.

New U.S. stress test needed: higher interest rates

October 4, 2012

Don’t fight the Fed, the saying goes. The central bank is promising ultra-low rates into 2015. Yet the buildup of low-yielding debt on financial firms’ balance sheets means they may suffer badly if rates jump. The Fed aside, prudent bosses need to avoid fights with history, too.

Fed flunks crucial part of bank stress tests

March 8, 2013

The watchdog is happy enough saying what might happen to big banks if the economy tanks: they could lose up to $462 bln. But it’s inexplicably shy about revealing the effects of a sharp rise in interest rates. That’s just as real a risk that the Fed should disclose to investors.

European banks may face harsher tests from market

July 23, 2010

Europe's bank tests were not stressful enough. Only seven of the 91 lenders participating in the exercise administered by the continent's regulators will need extra capital to see them through a severe economic shock. The exams were undermined by failing to imagine a sovereign default. Forcing banks to disclose their government bond portfolios, however, gives investors the power to conduct their own more rigorous assessments.

EU bank stress tests create capital confusion

July 21, 2010

European Union bank stress tests have created confusion over capital. The best way to restore confidence in the sector would be to see how a crisis affects lenders' core Tier 1 capital. But that would require EU-wide unanimity over how to define it.