Three months after revealing that banks were using wildly different models to measure risk in their trading books, the Basel Committee on Banking Supervision has signaled that it looking for similar issues in the banking book.
In a report to the Financial Stability Board, the committee said it was looking at data from 100 banks in 15 jurisdictions to see how and why they assigned different risk-weights to their portfolios. Read more
Dividends and capital buffers
Regulators on both sides of the Atlantic are calling on banks to strengthen their capital buffers by lowering dividends.
Britain’s Financial Policy Committee yesterday suggested as much. Today, Eric Rosengren, the president of the Federal Reserve Bank of Boston, was more explicit.
Mr Rosengren’s approach is also more interventionist. Read more
Too big to fail; too global to save
Officials must do more to ensure no firm is too big to fail. So says the Basel Committee on Banking Supervision in its report on the progress made by its 27 members in introducing frameworks to resolve ailing banks.
Many of the 27 have made progress in granting powers to save local lenders. But for firms with operations around the globe, the problems are “largely unresolved”. Progress on burden-sharing between states remains “at a preliminary stage”.
No wonder. As Bill Dudley, the president of the Federal Reserve Bank of New York, has said, the bulk of regulation and financial information is contained within national boundaries. And these boundaries, Dudley believes, are formidable obstacles to overcome. Read more
Retired LSE professor Charles Goodhart makes a strong case in today’s FT about the systemic risks posed by bail-in bonds and contingent capital (cocos) — debt that converts to equity when a bank is in or near crisis.
But he may be overstating the case when he argues that the Basel Committee on Banking Supervision and the Financial Stability Board have become too enamoured of these cocos and should be forcing banks to raise more equity instead.
In fact, the BCBS did exactly what Mr Goodhart would have wanted when they met last month to determine how to make the world’s largest banks, known as Global systemically important financial institutions (G-sifis), more resilient and safer. The regulators and central bankers agreed that 25-30 institutions would have to carry extra capital — ranging from 1 to 2.5 per cent of their assets, adjusted for risk — on top of the global minimum of 7 per cent set for all banks last year. Read more
Will Ingves make a good chair of the Basel Committee?
The blueprint for Basel III is more than a year old. And there is consensus on its fundamental tenets – to hold more and better quality capital, for liquidity requirements, leverage ratios, and countercyclical buffers.
Yet the devil is in the detail. There remains disagreement on the calibration of countercyclical buffers, not to mention what form the leverage ratio and liquidity buffers should take.
So Sunday’s appointment of Riksbank governor Stefan Ingves to chair the Basel Committee is significant. Read more
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Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies. RSS
Michael Steen, Frankfurt bureau chief, covers the ECB and the eurozone's economies. He joined the Financial Times in 2007 as Amsterdam correspondent and later worked as a front page news editor in London. Before joining the FT, he spent nine years as a correspondent at Reuters, mostly in foreign postings that included a previous stint in Frankfurt, as well as Moscow, Kiev and central Asia. He read German and Russian at Cambridge.RSS
Robin Harding is the FT's US economics editor, based in Washington. Prior to this, he was based in Tokyo, covering the Bank of Japan and Japan's technology sector, and in London as an economics leader writer. Robin studied economics at Cambridge and has a masters in economics from Hitotsubashi University, where he was a Monbusho scholar. Before joining the FT, Robin worked in asset management and banking. RSS
Ralph Atkins, capital markets editor, has been writing for the Financial Times for more than 20 years following an economics degree from Cambridge. From 2004 to 2012, Ralph was Frankfurt bureau chief, watching the European Central Bank and eurozone economies. He has also worked in Bonn, Berlin, Jerusalem and Brussels. RSS
Claire Jones is Money Supply economics team writer, based in London. Before joining the Financial Times, she was the editor of the Central Banking journal and CentralBanking.com. Claire studied philosophy and economics at the London School of Economics. RSS
