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regulatory reform

Tier 1 capital: too much faith in a Q&A, or why didn’t you call me?

It turns out that market participants may have put too much faith in the European Banking Authority (EBA). The EBA’s answer to a submitted question indicated that non-called bank Tier 1 instruments – or at least those similar to one described by the questioner – cannot simply be reclassified as Tier 2 capital after the first call date. The EBA’s answer to this specific question – which some wro…

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Going Dutch – SNS nationalisation

We have been talking about the emergence of, and the effects of, the financial crisis in our blogs for a number of years now. However, more than 5 years into the crisis even we can be surprised. On Friday the Dutch government nationalised SNS, as capital injections from the private sector failed to appear. This action was undertaken to maintain the stability of the Dutch financial system.

This …

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The “safety race”: the systemic implications of the bank asset grab

Anyone monitoring the risks in the global financial system knows that those of us who lend to banks are increasingly asking for some kind of security in order to do so. Issuance volumes for covered bonds have increased and more countries have recently passed covered bond laws or are in the process of debating legislation. Andrew Haldane, Executive Director for Financial Stability at the Bank of…

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An update on the European bank stress tests

Guest contributor – Tamara Burnell (Head of Financial Institutions, M&G Credit Analysis team)

The publication of the Committee of European Banking Supervisors (CEBS) stress tests proved exactly the damp squib that most had been expecting. There was some additional useful disclosure on sovereign risk exposures (apart from a few German banks) but a decided lack of rigour in the regulatory approac…

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EU bank stress tests increasingly farcical

Guest contributor – Tamara Burnell (Head of Financial Institutions, M&G Credit Analysis team)

Press reports following the meeting of EU finance ministers yesterday suggest that the eagerly anticipated Committee of European Banking Supervisors (CEBS) bank stress tests will be extremely “unstressful”. There’s talk of government bond holdings only being stressed for “market price volatility” if he…

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A Bond Vigilante visits the Bank of International Settlements – Video update

Anyone who has had a flight delayed or cancelled as a result of the volcano in Iceland will know how frustrating it can be. For someone in that position, there isn’t much that can be done about it. Ben Lord, Fund Manager of the M&G High Interest Fund, recently found himself stuck in Basle, Switzerland on the morning after the announcement of the eurozone bailout package. Rather than haggle with…

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Speculative thoughts

Democratic governments are designed and exist to promote and protect the interests of their population. Thus they tend to be described as “good”. Capitalists are seen to be out for themselves and therefore acting in their own selfish interests. They are often described as “bad”. However, in order to have a prosperous society one has to combine the socialism and fairness of democracy with the ef…

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Volcker Rules, OK for Bank Bondholders?

Guest contributorJeff Spencer (Financial Institutions Credit Analyst, M&G Credit Analysis team)

In an attempt to reduce risk-taking at financial institutions, yesterday President Obama announced a proposal to bar banks from engaging in proprietary trading activity that was unrelated to customer business. He also advocated that banks be stopped from owning or investing in hedge funds or priva…

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Taxing time for banks – lessons that still need to be learned

There has been a lot of anguish and complaints from bankers about Obama’s tax on banks, and complaining why they have been singled out. Some of this is the usual self interested financial posturing (they are bankers!), some of it is in response to unfair political criticism, typified by last week’s focused grilling of Lloyd Blankfein, a successful CEO of a successful bank (Goldman Sachs). Ignor…

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