Financial Regulatory Forum

COLUMN-EU bank stress tests: what’s the point?

Employees of the Deutsche Bank walk in front of the Deutsche Bank headquarters in Frankfurt April 28, 2010. REUTERS/Johannes EiseleBy Keith Mullin, Editor at Large, International Financing Review; the views expressed are his own.

LONDON, March 4 (Reuters) – The European bank stress tests that are just kicking off are a pointless and futile exercise that will cause more harm than good.

I’ve written before in this column about the laws of unintended consequences. There could be some pretty serious ones here because the list of banks that fail the supposedly more rigorous tests will lead to an A and B list of saints and sinners.

I doubt the European Commission contemplated the notion of transforming the bank regulatory apparatus into the role of official stockbroker to the masses. But that’s what it is doing in that banks that fail the tests will in effect become a sell sheet initiated and endorsed by European regulators. (more…)

ANALYSIS-Ratings uncertainty stunts contingent capital growth

By Jane Merriman

LONDON, Aug 6 (Reuters) – Contingent capital, a breed of hybrid bond that could help capitalise banks in crisis, will struggle to grow into a mainstream asset class if rating agencies persist in refusing to rate it.

Contingent capital came into the spotlight nine months ago when Lloyds, converting existing hybrid debt, raised over 10 billion pounds as it raced to shore up its balance sheet.

The new form of hybrid bonds convert into equity capital when a bank hits trouble, topping up capital if it falls below a certain level, an attractive option for issuers especially as equity capital is expensive and scarce.

COLUMN-Stress tests and cargo cults: James Saft

(James Saft is a Reuters columnist. The opinions expressed are his own)

By Jim Saft

HUNTSVILLE, Ala., July 8 (Reuters) – How are European officials orchestrating the bank stress tests like Pacific islanders speaking into coconuts and waiting for cargo to drop from the skies?

They both make the elemental error at the heart of all cargo cults; they mistake necessity for sufficiency and hope that imitation and affect will make up for a lack of substance.

(more…)

ANALYSIS-Gloom starts to lift in euro zone crisis

By Timothy Heritage

BRUSSELS, July 9 (Reuters) – Gloom over the future of the euro zone is starting to lift after months of crisis, with policy makers sounding increasingly confident that the worst is over.

There are still plenty of risks. Economic growth is fragile, governments must keep the political will to impose austerity steps for years to come, and small banks in the hardest-hit countries remain unable to borrow in the markets, making them dependent on the European Central Bank for funds.

(more…)

BREAKINGVIEWS-Far too little stress in U.S. bank reform

– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –

By Rob Cox

NEW YORK, April 6 (Reuters Breakingviews) – Improving U.S. bank regulation may call for a little more stress. The disclosure and discipline imposed by the Federal Reserve’s stress tests of big banks a year ago drew a line under the crisis. The tests separated sheep from goats and led to tens of billions of dollars of new capital being raised. It’s a shame that stress tests aren’t becoming an annual event.

The tests have been overshadowed by the Troubled Asset Relief Program. After all, that $700 billion plan to recapitalize the banking system kept institutions like Citigroup, Bank of America and Morgan Stanley from going under. But the TARP scheme was fraught with conflicts still bedeviling the debate over reform, including the problem of bankers paying themselves handsomely on the back of taxpayer bailouts. As a result, few are calling for a repeat of the TARP experience.

Czech central bank sees banks withstanding shocks

    PRAGUE, Feb 23 (Reuters) – The Czech banking system will maintain sufficient capital adequacy in all projected scenarios of economic and market development, central bank stress tests showed on Tuesday. (more…)

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.

(more…)

U.S. Fed: 9 of 10 large banks met capital goals

By David Lawder
WASHINGTON, Nov 9 (Reuters) – Nine of 10 large U.S. banks ordered to raise capital in May have met or exceeded their goals and the laggard — auto lender GMAC Financial Services — is negotiating for a fresh infusion of taxpayer funds.

(more…)

EU banks solid, stress test shows-Spain finmin

Spain's Economy Minister Elena Salgado listens to a question during a news conference at the G20 Finance Ministers summit in London September 5, 2009. Finance ministers and central bankers from the G20 nations were meeting in London on Saturday to lay the foundations for a summit of leaders in the U.S. city of Pittsburgh later this month.    REUTERS/Kevin Coombs     (BRITAIN BUSINESS POLITICS)    GOTHENBURG, Sweden, Oct 1 (Reuters) – The European banking sector is solid enough to withstand a deterioration of economic conditions and under the worst case scenario could face 400 billion euros of write-downs, Spanish Finance Minister Elena Salgado said.
   “The ministers shared the view that the 22 systemic banks (in Europe) are solid enough to resist a deterioration of conditions. This deterioration will not happen,” Salgado told reporters on the sidelines of an EU finance ministers’ meeting.
   Asked about the 400 billion euros figure, reported in the media, she said : “In the worst case scenario, the maximum total of risks would be around this figure.
   ((Reporting by Julien Toyer, writing by Jan Strupczewski, tel +32 2 287 68 37, fax  +32 2 230 55 73, e-mail: jan.strupczewski@reuters.com; RM: jan.strupczewski.reuters.com@reuters.net))
 Keywords: EU BANKS/TEST 
  
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 Thursday, 01 October 2009 17:17:35RTRS [nWEA3388] {EN}ENDS

EU banks must have cash buffer for crisis – regulators

By Huw Jones
LONDON, Sept 22 (Reuters) – Banks in the European Union must have a cash buffer to survive the first month of a crisis, regulators said on Tuesday, sparking industry concern that cross-border groups will face a new patchwork of rules.

(more…)

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