Too-Big-to-Fail Banks Face Up to $870 Billion Capital Gap (Bloomberg)
Too big to fail is likely to prove a costly epithet for the world’s biggest banks as regulators demand they increase debt securities to cover losses should they collapse. The shortfall facing lenders from JPMorgan Chase & Co. to HSBC Holdings Plc could be as much as $870 billion, according to estimates from AllianceBernstein Ltd., or as little as $237 billion forecast by Barclays Plc. The range is so wide because proposals from the Basel-based Financial Stability Board outline various possibilities for the amount lenders need to have available as a portion of risk-weighted assets. With those holdings in excess of $21 trillion at the lenders most directly affected, small changes to assumptions translate into big numbers.
Banks Get Ready for Triple-Threat Tuesday (MoneyBeat)
Third-quarter earnings season for the banking sector kicks off Tuesday with an unprecedented three banks—J.P. Morgan, Wells Fargo, and Citigroup—announcing their quarterly results on the first day. “That’s over 200 pages of information that need to be reviewed,” said CLSA bank analyst Mike Mayo, struggling to contain his joy [...] “I’m going to tell my wife, ‘Honey, I will not be home for dinner,’” Mr. Mayo said. Asked about his preparations for the big day, Mr. Mayo already has it all planned out: “Back-to-back spin classes to work off the trepidation. Maybe a squash game in there too.”
Ex-UBS Banker Tax Trial Rides on Underling’s Credibility (Bloomberg)
Jury selection is set to begin today in federal court in Fort Lauderdale, Florida, where Weil was indicted in 2008 on a charge that he conspired to help 17,000 U.S. taxpayers hide $20 billion in accounts from the Internal Revenue Service. Since his arrest last year in Italy, Weil, 54, has maintained his innocence and blamed others for the bank’s misconduct. He is the highest-ranking official among three dozen foreign bankers, lawyers and advisers charged in a seven-year U.S. crackdown on offshore tax evasion. The chief witness against him is Martin Leichti, former head of cross-border banking at UBS. Leichti’s testimony about any conversations the two men had might be crucial to establishing Weil’s state of mind, said Dan Levy, a former federal prosecutor in New York.
Venezuela Default Almost Certain, Harvard Economists Say (Bloomberg)
The economy is so badly managed that per-capita gross domestic product is 2 percent below 1970 levels, the professors wrote in an column published by Project Syndicate yesterday. A decade of currency controls has made dollars scarce in the country with the world’s biggest oil reserves, causing shortages of everything from deodorant to airplane tickets.
G20 watchdog toughens up new rule for securities financing (Reuters)
The Financial Stability Board (FSB), which coordinates regulation for the Group of Twenty (G20) economies, published on Monday its new rule for the first global minimum “haircut” or discount on collateral used to back securities financing transactions, toughening up its original draft proposal. “The regulatory framework for haircuts on securities financing transactions issued by the FSB today addresses important sources of leverage and the level of risk-taking in the core funding markets,” FSB Chairman Mark Carney said in a statement. From the end of 2017, banks must impose a haircut of at least 6 percent on the collateral they receive from non-banks as “insurance” on the value of securities being loaned. The FSB had originally proposed a minimum haircut of 4 percent. This means that for every $100 a hedge fund, for example, gets from a securities transaction, the bank must collect collateral worth at least $106.
Parrot Missing For 4 Years Comes Home Speaking Spanish (AP)
A pet parrot that spoke with a British accent when it disappeared from its home four years ago has been reunited with its owner — and the bird now speaks Spanish…the reunion was brought about by a Southern California veterinarian who mistook the African gray parrot for her own missing bird. Teresa Micco tracked Nigel’s microchip to Darren Chick, a Brit who lives in Torrance. Little is known about Nigel’s whereabouts the past four years, but Chick says the bird’s British accent is gone and it now speaks Spanish. It’s the fifth parrot reunion facilitated by Micco, who has been running ads for her own missing bird for nine months. Read more »