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Dec 22, 2011
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Bond market will grow at banks’ expense in 2012

By Peter Thal Larsen
The author is a Reuters Breakingviews columnist. The opinions expressed are his own

Can the bond market take the place of banks? That question will be partially answered in 2012, as borrowers seek to bypass strained lenders in search of cheaper sources of credit. For big companies, tougher regulation of banks has accelerated a long-term shift to seeking funds directly from investors. But small companies and consumers won’t find it so easy to make the switch.

Dec 12, 2011
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RBS shows watchdogs need power to stop M&A

By Peter Thal Larsen
The author is a Retuers Breakingviews columnist. The opinions expressed are his own.

The failure of Royal Bank of Scotland shows bank reform still has some way to go.

Dec 9, 2011
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UK’s euro isolation may backfire on City of London

By Peter Thal Larsen
The author is a Retuers Breakingviews columnist. The opinions expressed are his own.

The City of London may regret David Cameron’s euro isolation. Britain’s prime minister opted out of a pan-European deal to save the euro zone after failing to secure special protection for the UK financial services industry. But his stand leaves Britain’s dominant economic sector exposed – both in Europe and at home.

Nov 21, 2011
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Forget PIGS, Europe’s problem is broken EEGs

By Peter Thal Larsen
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The euro zone needs a new acronym. For the past three years, PIGS has served as a catchall for the cash-strapped states on the single currency’s periphery. But now that the crisis has moved to the core, a change is overdue.

Nov 8, 2011
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Bank of England reaches limits of independence

By Peter Thal Larsen. The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The Bank of England is under the microscope. A UK parliamentary committee has called for the central bank to be better governed and more accountable. It’s important to keep the government at arm’s length. But the new post-crisis powers vested in the Threadneedle Street institution make greater political scrutiny inevitable.

Nov 4, 2011
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Bob Diamond sets high bar for bank rehabilitation

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

By Peter Thal Larsen

Bob Diamond has discovered humility. Ten months after he declared that the period for banks to show remorse was over, Barclays’ chief executive has acknowledged the need to rebuild trust. Though the change of tone is refreshing, he must now demonstrate that reality reflects the new ideal.

Oct 18, 2011
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EU bank recap may be smaller than feared and hoped

By Peter Thal Larsen
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
LONDON – Bailing out Europe’s banks may be less expensive than governments feared — and investors hoped. European Union officials are discussing a plan that would require lenders to hit a demanding core Tier 1 capital ratio of 9 percent, but not factor in the effects of a deep recession. A lower-than-expected bill is good for euro zone governments’ finances — but may not be enough to win back the market’s confidence.
Europe’s latest recap is not a stress test like July’s, in which the European Banking Authority asked the continent’s largest 90 lenders to reach a minimum core Tier 1 capital ratio of 5 percent after a severe economic downturn. The latest effort involves no such doomsday planning: the capital calculation is simply based on banks’ balance sheets at the end of June. Many lenders will be at or close to 9 percent already: according to EBA data, the 90 banks that participated in the summer’s tests had a combined, unstressed core Tier 1 ratio of 8.4 percent at the end of 2010. Since then, some have raised fresh capital, while most have boosted their buffers with retained earnings. True, banks are not escaping entirely. Lenders with large exposures to troubled sovereign debt may have to hold an extra capital buffer. This could be substantial: if the sovereign debt disclosed in July’s stress tests were marked to current market prices, banks would have to write off almost 80 billion euros, according to Breakingviews calculations. Even then, however, the total capital shortfall might be no more than 100 billion euros, according to Morgan Stanley — less than half most analysts’ estimates. That’s good news for euro zone governments, which are expected to finance most of the capital injections. But investors may be less impressed. For one, they have been primed to expect a larger recap. And while haircuts on sovereign debt are welcome, banks will also suffer losses on private sector loans in peripheral euro zone economies. An added concern is that banks will be given up to nine months to hit the new target. That will encourage them to achieve the capital target by shrinking their balance sheets, possibly triggering a credit crunch. In that case, any relief from Europe’s bank recap would be short-lived.

 

Oct 6, 2011
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Credible EU bank tests need a higher pass mark

By Peter Thal Larsen
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

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. But this wouldn’t be enough. The authorities should also raise the minimum capital ratio that banks need to clear.

Oct 5, 2011
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Bank debt confusion makes an unwelcome comeback

By Peter Thal Larsen and Antony Currie
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

The parallels between the current market turmoil and the 2008 meltdown become more striking by the day. The latest crisis throwback is the bizarre earnings boost created by banks’ deteriorating creditworthiness. UBS says widening spreads on its own debt added 1.5 billion Swiss francs to its bottom line in the third quarter. Accountants, rather than banks, are to blame. But financial firms are still inconsistent and selective when reporting this perversity.

Sep 22, 2011
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How Europe can get more bang for its bailout buck

By Peter Thal Larsen.

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

Europe’s bailout fund is no longer fit for purpose. As the euro zone’s sovereign debt crisis has spread to Spain and Italy, the 440 billion euro fund looks increasingly puny. Expanding it is politically tricky. But using the EFSF’s remaining firepower to guarantee new sovereign debt would give it more clout — and buy some time.

    • About Peter

      "Peter is Assistant Editor of Reuters Breakingviews, based in London. He oversees coverage of financial services and regulation. Prior to joining Reuters, Peter spent 10 years at the Financial Times. From 2004 to 2009 he was the FT’s banking editor, leading the paper’s award-winning coverage of global banking during the credit crunch. Between 2000 and 2004 Peter reported for the FT from New York. He played a leading role in the paper’s coverage of the 9/11 attacks and their aftermath. A Dutch national, Peter has degrees from Bristol University and the London School of Economics."
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