Tag: capital

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Too Big to Fail and How Little the Concept is Misunderstood

Colin Henderson

Sheila Blair Chair of the American FDIC (retail deposit guarantees) speaks clearly yet with words that are hardly reflective of US policy. The first task is to scrap the “too big to fail” doctrine. To do this, we need to fix weaknesses in our regulatory system, and achieve global reform for effective resolution processes when large firms fail. With these steps, we can foster real market discipline and make international cooperation more successful. Co-incidentally I watched the BBC World Debate earlier with an interesting group of contrasts (no video online yet) BBC World Debate – Global Financial Crisis: Can we … Continue reading Too Big to Fail and How Little the Concept is Misunderstood

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G20 Finance Minister regulation changes will constrain new investment and require a strategy rethink

Colin Henderson

The G20 Finance Ministers meeting in London concluded some new principles for Bank supervision, that follows the predictable path we have been seeing. Here is a summary from BIS, and some additional analysis from Financial Times. The key points that will drive banks to seek additional efficiences to compensate, are raised capital and liquidity requirements. Another key one is #4, the countercyclical buffer; in other words during good times put money away for a rainy day. These changes in particular will constrain new investment in lending and in anything that does not drive higher profits. In any event this will … Continue reading G20 Finance Minister regulation changes will constrain new investment and require a strategy rethink

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Bank of America Needs $33.9 Billion | NYT

Colin Henderson

As predicted yesterday, the amount of capital the banks need is far in excess of the amounts they were negotiating. This news just in from the NYT confirms what had to be the case.  If we do the math based on project bad debts, it had to be in the $20bn + range for the big banks.  Similar results will apply to Wells, Citi,  PNC and others in the group of 19.  Watch out for the stock market tomorrow.  Reality bites. Bank of America Needs $33.9 Billion, U.S. Determines The government has determined that Bank of America will need $33.9 … Continue reading Bank of America Needs $33.9 Billion | NYT

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What does recovery mean for Banks?

Colin Henderson

Banks are at the centre of the economy.  Business and consumers conduct their day to day business using money and they do this through banks.  Stating the obvious you may say?  This is why I study the economy so closely and try to understand how it will look in the future, because that has a direct relation to how banks will look in that future. We are in a crisis of debt.  It is a debt crisis because consumers and businesses are over-leveraged.  Their debt is too high relative to todays asset values.  Asset values have decreased by 25 – … Continue reading What does recovery mean for Banks?