Tag: leverage

Business Models1 Comment

Conservatives propose radical changes to banking regulation in UK

Colin Henderson

There are some dramatic proposals contained in the upcoming white paper from the Conservatrive opposition [UK] this week. They make sense and go to the core of the flexibility that allowed banks to become too speculative. They address leverage, and the investment banking/ retail banking integration challenge. The Conservatives are larely expected to win the next election, sometime in the next 12 months. Tories say break up the big banks | The Times He will be clear, however, that the Bank should have powers to order banks and other financial institutions to hold more capital when times are good, so … Continue reading Conservatives propose radical changes to banking regulation in UK

Economy, Innovation

Bank deposits – the hidden risk associated with government guaranteed deposits

Colin Henderson

The focus on bank financial strength is generally on the lending side of the business and the potential for bad debts.  Here is another view, and something that drives some banks to make ever riskier loans to produce enough revenue to pay for their deposits. For Banks, Wads of Cash and Loads of Trouble | NY Times The 79 banks that have failed in the United States over the last two years had an average load of brokered deposits four times the national norm … But the hot money also came with a high cost. To lure the money from … Continue reading Bank deposits – the hidden risk associated with government guaranteed deposits

Business Models

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?

regulation2 Comments

Bank capital levels around the world are low and sufferring

Colin Henderson

The IMF report had a spreadsheet in the appendix with bank capital levels around the world. While it has individual countries, I summarised into this chart.  The data shows Capital as a percentage of Assets so higher is good, lower is bad. Note the negative trends in most except Canada, and this is based on the latest data to end of 2008.  Use the thumbnail for a larger version that is clearer. Continue reading Bank capital levels around the world are low and sufferring