Financial Regulatory Forum

Canadian banking outlook downgraded over ‘bail-in’ move, adding to recent financial stability concerns

By Daniel Seleanu, Compliance Complete

TORONTO, July 17, 2014 (Thomson Reuters Accelus) -  In yet another worrying sign for Canada’s financial sector, Moody’s Investors Service has lowered its outlook for the Canadian banking system from “stable” to “negative” over uncertainty about government willingness to bail out banks during a crisis. It follows a pair of recent warnings issued by the Bank of Canada (BOC) and the Bank for International Settlements (BIS), both of which highlighted the growing risk of stress posed by runaway consumer debt and property prices.


Moody’s negative outlook reflected the rating agency’s pessimism over Canada’s plan to implement a “bail-in” regime that would avoid taxpayer-funded bank bailouts by shifting some of the burden to bondholders. It would allow banks to convert some of their debt into to equity during a crisis.


New Basel credit-exposure limits will force banks to think harder on concentration

By Bora Yagiz, Compliance Complete

NEW YORK, Apr. 9 (Thomson Reuters Accelus) - The Basel Committee’s March 26 plan on the supervisory framework for measuring and controlling large exposures is offering a new insight into how internationally active banks should determine their level of exposures to a single counterparty and a group of connected counterparties, and which factors they should weigh in making the necessary calculations.

The proposed framework recognizes for the first time that no form of concentration risk has been considered in the previous calculation of capital requirements. It, therefore, considers a large exposures framework to be complementing the Committee’s work on risk-based capital standards, which by themselves do not take into account the possibility of large losses due to concentration risk. (more…)

New U.S. capital framework may prove burdensome for small banks

By Bora Yagiz

NEW YORK, June 25 (Thomson Reuters Accelus) - As part of an effort to bring the United States in line with the international standards of Basel III, the Federal Reserve Board, the Office of the Comptroller of Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC), on June 8, 2012, jointly proposed three rules dubbed together as the integrated regulatory capital framework.

Two of these rules, namely the proposal on Basel III, and the proposal on Standardized Approach (the approach used by small banks) would modify standards for risk-weighted assets calculation, set new minimum capital requirements and refine capital quality through various eligibility restrictions for all banks, savings associations, bank holding companies (BHC) with greater than $500 million of assets, and all savings and loan holding companies (SLHC). (more…)

COLUMN-The journey’s just starting on bank capital

By Keith Mullin, Editor at Large, International Financing Review

– the views expressed are his own –

LONDON, Nov 12 (Reuters) The popular quote about focusing on the journey rather than the destination could well have been written about current moves to create the next generation of bank capital instruments and determine the place of hybrid debt in bank capital structures.

Stakeholders – politicians, regulators, supervisors, issuers, intermediaries and investors – have spent an inordinate amount of time trying to come up with a formula that will offer affordable hybrid capital to banks that meets lawmakers’ demands for a robust safety net (i.e. one that absolves taxpayers of responsibility) and at the same time hits investors’ return and risk metrics. Yet for all of the progress made so far, we are nowhere near a conclusion on rules and processes that will facilitate any of the above. (more…)

PREVIEW-Basel under gun to divulge bank rule details earlier

By Huw Jones

LONDON, July 9 (Reuters) – Global regulators gathering next week to finalise tough new bank capital rules face increased pressure to be more open after the market’s positive response to greater transparency over European bank stress tests.

The Basel Committee of central bankers and supervisors meets on July 14-15 to finesse its Basel III reform.


Australian banks would benefit from more capital – central banker

MELBOURNE, March 1 (Reuters) – Australian banks could do with a little more capital parked on their balance sheets even though they have weathered the global financial crisis in good shape, the country’s central bank chief said on Monday.

Reserve Bank of Australia Governor Glenn Stevens, appearing at a business conference, was responding to a question about controversial new bank-liquidity rules that have met with a cold reception from the country’s major lenders.

“It probably wouldn’t hurt for there to be a little more capital and more attention to liquidity,” Stevens said.

Bank reform may have $220 billion global capital hit – analysts

LONDON, Feb 17 (Reuters) – Top global banks will need an extra $221 billion of capital and see annual profits slump by $110 billion if all proposed regulations to reform the industry are brought in, leading analysts said on Wednesday.

If all the initiatives from regulators are implemented it would cut the average return on equity to 5.4 percent from 13.3 percent next year, hurt economic growth and raise costs for bank services, JPMorgan analysts warned.

“The cumulative impact of all the proposed regulation suggests that there is a real risk that we may move from a system that was under regulated to one that is over regulated and that that could cause a significant increase in lending costs and a negative impact on the economy,” Nick O’Donohue, head of research at JPMorgan, said in a research note.