Category: UK

regulation, UK3 Comments

On Bank Systemic Risk, International Integration and Capital Requirement | Turner Discussion Paper

Colin Henderson

There has been much talk of systemic risk since the financial crisis hit. I see it more as a crisis of banking and banking confidence, and the debate on systemic risk is critical because it exists because of Government intervention and protections, implicit and explicit. The latest from Lord Turner of the FSA is a discussion paper, that reviews systemic risk and provides as good a discussion on that topic as I have seen. What it particularly interesting is how the insights raise the prospect of penalising globally integrated banks over nationally independent organizations with higher capital requirements. Things just … Continue reading On Bank Systemic Risk, International Integration and Capital Requirement | Turner Discussion Paper

UK1 Comment

BofE Governor in the dark on banking regulation

Colin Henderson

The management of UK banking/ financial system has become highly politicised reflecting the general Browns government style. This from the meeting yesterday between Mervyn King, Governor of the Bank of England and the Commons committee. Governor in dark on banking regulation | FT His comments to MPs on the Commons Treasury committee flabbergasted its members. John McFall, the committee chairman, said the lack of communication at the top level between the Bank, Treasury and Financial Services Authority was unbelievable. “The tripartite authorities are a communications black holes, which is worrying.” Continue reading BofE Governor in the dark on banking regulation

UK

Lloyds moves to regain independence

Colin Henderson

This is nice to see.  Lloyds is was the most risk averse bank before the crisis.  Yet after the Government intervention and Lloyds ‘takeover’ of HBOS with all their self inflicted mortgage problems, the situation altered dramatically. I hope Lloyds will be a survivor, and can remove government ownership. Lloyds repays £2.3bn to UK Treasury Lloyds Banking Group has repaid £2.3bn to the UK Treasury after strong support for its open offer and placing aimed at repaying the government’s £4bn of preference shares. Lloyds is believed to be the first major western bank to repay state equity in the round … Continue reading Lloyds moves to regain independence

UK2 Comments

“Northern Rock risk revealed in 2004” | FT

Colin Henderson

It appears the weakness in the UK banks that showed first when the crisis hit, were foretold 5 years ago in a BoE simulation. Northern Rock risk revealed in 2004 | FT Banking regulators identified Northern Rock as the weak link in Britain’s banking system during secret “war games” held as long ago as 2004, the Financial Times has learned. The risk simulation planning, conducted by the Financial Services Authority, the Bank of England and the Treasury, made clear the systemic risks posed by Northern Rock’s business model, and its domino effect on HBOS, then the UK’s largest mortgage lender. Continue reading “Northern Rock risk revealed in 2004” | FT

Canada, UK, US1 Comment

Enormous shifts have occurred in banks’ market capitalisation

Colin Henderson

The degree of shift that has occurred and is occurring as we speak with respect to bank valuations is simply staggerring.  What got me going on this was when I noticed that the combined market capitalisation (stock exchange value of a company) of Lloyds Bank, Barclays, and HBOS was less than several of the Canadian banks.  So with the valuable assistance of Google Finance here are some statistics, with some notes following. the banks picked here have had their value cut in half the UK banks are in terrible shape with low market cap, and reflecting low P/E the Canadian … Continue reading Enormous shifts have occurred in banks’ market capitalisation

Canada, sub prime, UK, US

Canada banking sector is avoiding the troubles in US and UK

Colin Henderson

The press is all doom and gloom at the moment.  Not without reason, but the causes and implications are getting blurred.  So I did a simple analysis comparing three stock markets, their fall since mid 2007, and the relative importance of the banking sector in that fall.  The results suggest that it does depend where you live.  There is an all out banking crisis in the US and UK, based on market sentiment.     Somehow Canadian banks are not regarded with such fear as the others.  This no doubt partly due to the early work of Purdy Crawford and … Continue reading Canada banking sector is avoiding the troubles in US and UK

EU, UK, US1 Comment

How much of this is a US bailout for a European problem?

Colin Henderson

Sometimes you have to read something twice because you thought it was a mistake.  I had that moment in an article in the paper version of the Financial Times this morning.  It lists European Banks, and shows the percentage their assets are of their country’s GDP.  Here is a synopsis, with just those that are close or exceed their country’s GDP. For fun I added the North American view, and even more fun I added Microsoft, one of the largest companies in North America.  It shows that the relative size of Banks to the European economies is a significant proportion, … Continue reading How much of this is a US bailout for a European problem?

UK

Lloyds takeover of HBOS is finalised at $12 bn | could be the new "worlds largest Bank"

Colin Henderson

Here are some background facts on the two banks.  The combined employee base is 142K now, with nearly $1 bn in assets. Their tier 1 capital if we take the % times the combined asset base, suggests the new Bank come in around $160 bn, which if I am correct, will make them the largest bank in the world, based on capital base.  However the accounting in a merger is not simply additive, so that isn’t definitive, but directionally the new UK Bank is enormous. Technorati Tags: Lloyds,HBOS,worlds biggest banks Continue reading Lloyds takeover of HBOS is finalised at $12 bn | could be the new "worlds largest Bank"

UK

HBOS … could they be next?

Colin Henderson

Serious concerns about my old alma mater Bank voiced from Citi analysts.  They have a significant funding gap apparently, although by my calculations they are very well capitalised.  Their issue appears to be liquidity.  The vultures are lurking.  In a related note, apparently 25% of WAMU shares are sold short at the moment.  HBOS falls on wholesale funding concerns Shares in the UK’s largest mortgage lender fell up to 40 per cent earlier in the session and settled 50½p lower at 182p, cutting its market capitalisation to £9.58bn ($17.1bn). The collapse of Lehman has made banks more reluctant to lend … Continue reading HBOS … could they be next?