Is the medicine for financial services turning out to be worse than the disease?
By Susannah Hammond
LONDON/NEW YORK , Sept. 9 (Thomson Reuters Accelus) – Almost three years on from the fall of Lehman Brothers and the widespread public bail-out of financial services the world is looking grim. In the white heat of the crisis itself jurisdictions, policymakers and governments moved together to resolve the worst of the immediate issues and bought global financial services time to heal. While some recovery and mending of balance sheets has certainly taken place, global financial services continue to suffer at the hands of divergent policymakers, international recessions and sovereign debt crises.
The medium-term aftermath of the financial crisis may well turn out to be more damaging to financial services than the crisis itself. Quite how severe the current state of affairs has become was highlighted by the new head of the International Monetary Fund, Christine Lagarde, who stated that “there remains a road to recovery, yet, we do not have the luxury of time”. The risks to any recovery are increased by “a growing sense that policymakers do not have the conviction, or are simply not willing, to take the decisions that are needed”. (more…)
COLUMN – So, banker, how much do you get paid?
By Keith Mullin, Editor at Large, International Financing Review; the views expressed are his own
LONDON, Jan 7 (Reuters) – The New Year began as the old one ended, with a flurry of histrionics and hyperbole around the… OK, admittedly salacious… topic of bank bonuses.
The problem is there are now so many official, semi-official and generally interfering bodies and organisations spouting forth sanctimoniously and/or contradictorily about how banks should structure their compensation schemes and how much they should pay their staff that the only inevitable result – mystification – has duly been reached. (more…)
Basel’s Bark May Be Slow to Bite
By Erik Krusch
(Westlaw Business) – Between bank capital raises and media coverage, the Basel III era may be upon us. After months of anticipation, and more than a little dread on the part of banks, it is true that the Basel Committee on Banking Supervision (Basel Committee) has finalized the Basel III bank capital ratios and other measures. But not so fast. With history as guide, it’s apparent that there is a real gap between Basel-driven standards and actual implementation.
It is impossible not to see now that the financial regulators in the Basel Committee, trying to fend off a bank and a financial crisis, constructed an incredibly faulty Maginot Line.
It was built with lousy materials, like arbitrary risk-weights and humanly fallible credit rating opinions.
And it was built on the absolutely wrong frontier, for two reasons:
First, it was build where the risk are perceived high, and where therefore no bank or financial crisis has ever occurred, because all those who make a living there, precisely because they are risky, can never grow into a systemic risk. Is being perceived as risky not more than a sufficient risk-weight?
Second it was built where it fends of precisely those clients whose financial needs we most expect our banks to attend, namely those of small businesses and entrepreneurs, those who could provide us our next generation of decent jobs and who have no alternative access to capital markets.
Now with their Basel III the Basel Committee insists on rebuilding with the same faulty materials on the same wrong place and it would seem that we are allowing them to do so.
I am trying to stop them… are you going to help me or do you prefer to swim in the tranquil waters of automatic solidarity with those who are supposed to know better?
The implicit stupidity of the Basel regulations could, seeing the damage these are provoking, represent an economic crime against humanity!
http://subprimeregulations.blogspot.com/
ANALYSIS-Big banks winners from new contingent capital move
By Jane Merriman
LONDON, Aug 27 (Reuters) – Plans to make hybrid bond investors share the pain when banks run into trouble could polarise the financial sector into big firms that can afford to pay up for capital and smaller players that cannot.
Financial regulators want to ensure that taxpayers are not the only ones on the hook when banks fail by proposing that bonds that count towards a bank’s capital should be written down or converted to equity if it is close to collapse.
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.
Euro rescue could help banks in regulatory battle
By Lionel Laurent and Huw Jones
PARIS/LONDON, May 10 (Reuters) – A $1 trillion rescue package to stabilise the euro could bolster European banks’ negotiating power as they attempt to fight stricter regulatory capital requirements they expect will hurt economic growth.
Europe’s lenders are already significant holders of sovereign euro debt and will be relied upon to buy more state-guaranteed debt as part of the rescue package, which is likely to see them push for extra concessions, analysts said.
“What there needs to be is a realisation among politicians that you cannot legislate and regulate the banks’ profitability away and expect them to keep buying your debts,” MF Global bank sector analyst Simon Maughan said.
Proposals to tighten bank capital requirements by the Basel Committee on Banking Supervision, due to be implemented by the end of 2012, have attracted criticism from banks, including BNP Paribas, Deutsche Bank and RBS.
The new euro rescue package, which will also see the European Central Bank buying euro sovereign debt, could support the banks’ view that the recovery is already fragile enough without extra regulation.
“This highlights how fragile the recovery is … We know that Europe is in a tight spot and the last thing you want to do is put undue further pressure on the banks,” said a London-based financial analyst.
ANALYSIS-Bank capital rules are regulatory drive’s top test
By Huw Jones
LONDON, May 4 (Reuters) – This month could bring overdue progress in a global drive to regulate the financial sector in the European Union and United States, but the acid test for policymakers will be agreeing global bank capital rules.
ANALYSIS – Tough Basel rules to boost banks’ long-term allure
By Dominic Lau
LONDON, Jan 26 (Reuters) – Stricter global banking rules will add to short-term headwinds facing European banks and hurt their shares, yet details being hammered out could make them more alluring for more risk-averse long-term investors.
The Basel Committee of central bankers and financial supervisors is seeking to avoid a repeat of the credit crunch and reduce the industry’s cyclical volatility by raising the quality of banks’ capital, after many of the assets they were using crumbled during the crisis.
U.S. President Barack Obama has also laid out rules to restrict some banks’ most lucrative operations.
Investors looking for quick returns may not like these ideas. The banking sector, which rallied sharply in 2009, is also under pressure from the prospect of central banks gradually withdrawing liquidity this year and from rows over bonuses.
But the tougher regime, with the Basel proposals taking effect by end-2012, may not be bad for long-term players. (For scenarios on possible impact of Basel proposals, click here)
“Regulation is a great thing. The last thing anybody wants to go through is the experience we had last year,” said Mark Bon, fund manager at Canada Life.
ANALYSIS – Shadow banks hold key to post-Basel bank profits
By Kevin Drawbaugh
WASHINGTON, Jan 26 (Reuters) – Bank profits are set to come under serious pressure at the end of 2012 from higher global capital and liquidity standards, but just how bad it gets depends greatly on the future of the “shadow banking system”.
U.S. banking sector analysts are increasingly focused on the interplay between the setting of global capital standards and parallel efforts to bring non-bank financial institutions to heel and moderate their resurgence in credit markets.
The ability of regulators to bring “shadow banks” — investment firms, hedge funds, insurers, special investment vehicles — under a new oversight regime will help determine the pricing power banks have to raise rates on future loans.
That will be a crucial factor in the long-term profitability of banks as capital, liquidity and leverage standards, under development through the slow-moving international Basel Committee process, eventually take hold.
“Regulators hope to strike the right balance here to ensure reasonable return and reduce the shift towards a ‘shadow’ banking system exempt from the Basel standards,” said Karen Shaw Petrou, managing partner at Federal Financial Analytics.
“Many issues requiring additional Basel work will determine the degree to which this is accomplished,” said Petrou, whose firm advises on financial regulatory policy.
EU watchdogs to conduct system-wide bank stress test
BRUSSELS, Jan 26 (Reuters) – European Union banking supervisors will again test of the banking system’s ability to withstand shocks, a top regulatory official said on Tuesday.
“For 2010 another exercise is scheduled,” Giovanni Carosio, chairman of the Committee of European Banking Supervisors (CEBS) told the European Parliament.
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