So the authorities have seemingly realised the old EFSF plan doesn’t work. What about the new plan?

There has been a lot of press coverage about the proposal to turn the existing EFSF (European Financial Stability Facility) into a monoline insurer of sovereign debt, where the new structure would be called the European Sovereign Insurance Mechanism (ESIM).

How is the ESIM supposed to work in theory?  No concrete details have been announced, but the basic thrust of the proposal is that the EFSF…

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Forget stress tests – ring fencing banks from sovereigns is the real issue

So the results of the bank stress tests are out. Do they add anything from an investor viewpoint?

Well, despite the best efforts of the European banking Authority, we didn’t get the harmonised EU data we were hoping for. To say that there are inconsistencies in the data would be an understatement.

Disclosure varies hugely bank by bank, especially in areas such as their Loan to Value ratios for …

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European bank stress tests, Road to Nowhere or Highway to Hell?

The European Banking Authority’s bank stress test results are due out on Friday evening.  Do the results mean anything or is it one for the talking heads? In our view it is a bit like taking a driving test – you can pass the test and yet still be a terrible driver.

The real test of whether anyone trusts you is whether people are prepared to get in the car with you. So whether or not banks pass …

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Who owns sovereign credit default swaps and why it matters

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

The Bank for International Settlements (BIS) recently released some fascinating data on the country risk exposure of global banks. For the first time we got some insight into not only which banks own Greek and other peripheral European sovereign, bank and corporate debt, but also who…

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Iceland and its banks – a blueprint for Europe?

Much has been written about Iceland’s response to its banking crisis, and whether its decision to put its banks into administration and swiftly force losses onto bank creditors has proved to be the key to restoring economic stability. Does this provide a model that Ireland and others should have followed? Commentators such as Paul Krugman (see here) and the IMF were quick to point out that Icel…

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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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Bank bailout schemes – are they really working?

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

The Bank for International Settlements (BIS) has published a study of the ‘impacts’ of the bank rescue programmes used to date – see here for the full publication entitled ‘An assessment of financial sector rescue programmes’. It concludes, not surprisingly, that the schemes have so far failed to gener…

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