Basel III

  • It's Comptroller of the Currency Thomas J. Curry!

    Banks

    New Capital Regulations No Big Deal, Say Regulators

    US banking regulators have released new proposals to require banks to have higher leverage ratios, counterintuitively meaning lower leverage, and you can go read them here, or read about them here or here. Briefly: in addition to regular Basel III risk-based capital requirements, banks are also subject to a backstop equity-divided-by-assets0 leverage test, and internationally […]

    / Jul 9, 2013 at 1:49 PM
  • This assumes for no particular reason that everyone should have a 10% capital ratio, and then looks at percentage point changes from that ratio if you normalized the risk weighting.

    News

    Some Banks Think Some Borrowers Are Riskier Than Other Banks Think They Are

    It’s become fashionable to make fun of the Basel risk-based capital rules for being overly complicated and subject to gamesmanship. “Why should we risk-weight assets at all?” people ask, for some reason. “Just look at simple leverage and assume that all assets are equally risky!” Sure okay. The problems with treating all risks the same […]

    / Jul 8, 2013 at 5:38 PM
  • Basel, where these things notionally come from.

    News

    Relatively Simple Basel Leverage Rules Still Pretty Complicated

    If you think bank regulation should be made much simpler it’s probably worth reading today’s Basel Committee document on bank leverage ratios, which the chairman of the Basel Committe described as “a relatively simple measure.” And what could be simpler than regulating leverage ratios?1 It’s just, like: tot up all your assets, including all your […]

    / Jun 26, 2013 at 5:03 PM
  • bucket-260x195

    News

    Prime Brokers Will Sell You Those Shares If You Want, But Wouldn’t It Be Cheaper To Rent?

    “Bucket shop” has become a general-purpose Wall Street insult – “don’t work at Blackstone, it’s a total bucket shop” – but it’s actually a particular thing, “[a]n establishment, nominally for the transaction of a stock exchange business, or business of similar character, but really for the registration of bets, or wagers, usually for small amounts, […]

    / Apr 2, 2013 at 11:58 AM
  • Find the synthetic CDOs.

    News

    Everybody Wins With Bespoke Synthetic CDOs

    Bloomberg this week had an article about how bespoke synthetic CDOs are coming back in vogue, and various people have fretted about that, because synthetic CDOs are scary, financial crisis, etc. And, sure, it’s certainly possible that the next financial crisis will be exactly like the last, only with more Cyprus.1 But today let’s talk […]

    / Mar 22, 2013 at 1:20 PM
  • One obvious interpretation of my Basel pictures is: I need a vacation.

    Banks

    Banks Getting Less Risky And/Or More Tricksy

    It’s a good day to be wholly cynical about banks so let’s be mean to the Basel III monitoring exercise. This is a thing where periodically the BIS looks into how far away banks are from meeting their Basel III capital requirements, with about a nine-month lag. The answer is always “pretty far away,” which […]

    / Mar 19, 2013 at 1:46 PM
  • Figure 5, first panel. Y axis is ratio of trading RWAs to total trading assets: lower numbers suggest umm more aggressive RWA practices, *maybe*. X axis is "a crude proxy for reliance on internal models for calculating mRWA," as opposed to using standardized approaches. Higher numbers = more use of internal models.

    News

    Banks’ Risk Measurements Rarely Off By Much More Than A Factor Of Ten

    Banks are opaque, or so I hear, and so the only way many people can stand to be around them is if they can have some sort of number to serve as a flashlight into all that opacity. One of the big numbers is Basel III risk-weighted assets, which are intended to, as the name […]

    / Jan 31, 2013 at 10:24 AM
  • J.P. Morgan in a hat. *You* illustrate "liquidity backstops for variable-rate municipal issuers."

    News

    Basel III Liquidity Rules Already Making Banking Simpler And Safer

    Financial innovation gets kind of a bad rap, and one of my favorite parts of this job is when I get to celebrate it just for being itself. Sometimes this means breathtaking magic like the derivative on its derivatives that Credit Suisse sold to itself, or elegant executions of classic ideas like the Coke shares […]

    / Jan 25, 2013 at 11:16 AM
  • more cow

    News

    Turns Out Global Regulators Are Fine WIth Using Credit Ratings To Decide What Banks Can Do

    It’s popular to say that financial markets and regulators have extremely short memories and so let’s say it about these new Basel liquidity coverage ratio rule changes out today. But not in an annoying sneery way. I mean, in an annoying sneery way, but not the obvious one. The story is that among the post-2008 […]

    / Jan 7, 2013 at 4:53 PM
  • this is what they're doing with your deposits

    Banks

    Banks Suffer From Too Much, Too Little Liquidity

    A thing that a bank does is take in short-term money in the form of deposits and lend out long-term money in the form of loans. Two things that you could want out of your banks are: for them to lend out lots of their deposits in long-term loans, and for them to keep lots […]

    / Dec 18, 2012 at 5:45 PM
  • not to scale

    News

    Bank Of England, Everyone Else, Thinks Banks Are Lying About Capital

    Aaahhh I love the Bank of England’s latest Financial Stability Report. I mean: I haven’t read it, per se. But it follows the wonderful official-sector-report layout of blandly apocalyptic text running down the right side and lovely charts running down the left, so you can close one eye and it’s a delight. The charts are […]

    / Nov 29, 2012 at 12:00 PM
  • News

    Should You Mourn For JPMorgan’s Trust Preferred Securities?

    I spend a good 40% of my day mindlessly refresing JPMorgan’s page at the SEC hoping they’ve filed a new structured notes prosupp so I was excited to see this: Following the Federal Reserve’s announcement on June 7, 2012 of proposed rules which will implement the phase-out of Tier 1 capital treatment for trust preferred […]

    / Jun 12, 2012 at 5:46 PM
  • Banks, News

    Let’s Talk About: Basel III

    The Fed last night unleashed eight zillion pages of Basel III implementation on the universe and I’m tempted to be like “open thread, tell us about your hopes and fears for capital regulation.” So do that! Or don’t because it is super boring, that is also a valid approach. Still I guess we should discuss.

    Starting slow though. Banks have to have capital, meaning that they have to fund some of their assets with things that are long-lived and loss-absorbing, like common equity, rather than with things that have to be paid back soon and at face value. The reason for this is that the rest of banks’ assets are funded with things that we really do want to be paid back soon and at face value, like deposits, and if the value of those assets declines you don’t want those deposits to be wiped out.

    The rules say that you need capital equal to a percentage of your assets. The game is deciding (1) what that percentage is, (2) what is capital (proceeds from selling common stock, and actual earnings, yes, but, like, deferred tax assets?), and (3) how you count assets (you might want more capital to shield you from losses in, say, social media stocks than you would to shield you from losses in Treasury bonds, so regulators use “risk-weighted assets,” so that $1 of corporate bonds counts as $1 of assets, $1 of Treasuries counts as $0 of assets, and $1 of Facebook stock counts as $3 of assets*).

    Anyway, here are the required capital levels:

    / Jun 8, 2012 at 1:17 PM
  • News

    Jamie Dimon Used To Live In America

    Over the years, Jamie Dimon has had a little bit of mild unpleasantness with banking regulators. But he’s always been bullish on America, which has formulated a secret sauce made out of “the best universities, best military, best rule of law, most innovation, the hardest working ethic of all.” Most important, America has this little […]

    / Sep 12, 2011 at 11:36 AM

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