• Or whoever. Disasters, etc., is the point.


    Federal Reserve Hints That Maybe Banks Should Hire Jerry Bruckheimer To Help Write Their Stress Test Scenarios

    Today the Fed released a paper making fun of banks for their lame responses to the Fed’s stress tests, both on prudential-regulatory and on literary grounds. For instance, the banks were supposed to come up with their own stress scenario and see how they’d do in that scenario, and a lot of banks apparently phoned […]

    / Aug 19, 2013 at 4:21 PM
  • Antony Jenkins one day you might find a place in my heart to rival Bob Diamond but you're not there yet.


    Barclays Asks Shareholders If They’d Mind Terribly Chipping In Just A Bit More Cash

    Barclays today announced a fancy new capital plan that illustrates the subtle cultural differences between US and UK banking. When U.S. regulators want banks to raise more capital, they tell them to do it by 2018, and the banks spend the intervening five years whining about it. When UK regulators want Barclays to raise more […]

    / Jul 30, 2013 at 5:52 PM
  • This is an acceptable use of red. Share repo = bad, in context.


    Banks Will Have To Buy Slightly Less Stock, Which They’re Not Very Good At Anyway

    One way to characterize US regulators’ new leverage ratio rules is that they require big banks to raise some $80-odd billion of capital, but that’s perhaps more alarmist than necessary. The banks don’t have to raise that money in the sense of going out and selling $80bn of stock or whatever. They make money every […]

    / Jul 10, 2013 at 9:36 AM
  • Unsurprising: BofA, best stock price performance, second-worst ROE.


    Bank Shareholders Are Selfish Jerks

    We talked last week about how shareholders are really the last people you’d want running a bank, if you’re the sort of person who doesn’t like banks. Conveniently Jesse Eisinger is that sort of person, and he’s pissed at shareholders for how they’re running banks: Shareholders can’t be counted on. That’s the message from the […]

    / May 29, 2013 at 6:14 PM
  • Tarullo does surprisingly well on Google Images.


    Fed Governor Wants Everyone To Remember That It’s Not Just Banks That Are Too Big To Fail

    One reason that a lot of people are enamored with the Brown-Vitter approach to bank regulation is that it’s very simple, and everyone deep down sort of thinks that the simple answer has to be better than the complicated one. “You don’t need risk-based capital or stress tests or liquidity coverage ratios or VaR models […]

    / May 3, 2013 at 3:23 PM
  • Brown and Vitter, though don't ask me which is which.


    Bill To Make Banking Boring Actually Might Be Kind Of Fun

    There are a lot of things you can read about the Brown-Vitter bill recently, though it’s a really nice day out and you probably shouldn’t. It’s not … it’s not like a real thing is it? When the text of the bill, which would raise the equity capital requirements on big banks to ~15% on […]

    / May 1, 2013 at 5:22 PM
  • We ... love ... raising ... capital


    Deutsche Bank Goes Back To Improving Its Balance Sheet In The Traditional Ways

    I’m beginning to get the hang of how Deutsche Bank works, which seems to be: When they lose money, that strengthens their capital position, and When they make money, that weakens their capital position, requiring them to sell shares. Maybe? Three months ago we talked about how … well, I said “Deutsche Bank Improved Its […]

    / Apr 29, 2013 at 4:14 PM
  • Still not a lot of  pictures of him but he's working on it.


    Mike Corbat Gets An A- For The Quarter From Mike Corbat

    Citi announced its quarter this morning and there are various ways to tell that it was good, of which “the stock was up” is probably the main one. A possibly less objective test is that, back in March, Mike Corbat told everyone how he would grade himself, if he was grading himself. As he put […]

    / Apr 15, 2013 at 3:23 PM
  • The units are weird I guess? They're "pre-crisis standard deviations," meaning the standard deviation of each statistic measured up to 2007.


    Senate Bill May Solve Too-Big-To-Fail By Shrinking Banks By 70%

    The Brown-Vitter bill, which two senators plan to introduce in an effort to dramatically raise bank capital requirements, has caused a range of fairly predictable reactions, and a few strange ones. Here, for instance, is a lobbyist complaining about “raising required capital to comically high levels,” but the comedy is perhaps elusive. But one stylized […]

    / Apr 8, 2013 at 3:20 PM
  • vitter brown capital 2


    Some Senators Think Big U.S. Banks Could Use An Extra Trillion Dollars Or So Of Capital

    There’s a surprisingly large and vocal group of people who think that capital ratio requirements for large banks should be much higher than they are now (like, 15+%), and that those ratios should be based on total assets rather than any sort of regulatory risk-weighting. It’s surprising not because those are especially bad or counterintuitive […]

    / Apr 5, 2013 at 5:46 PM
  • Find the synthetic CDOs.


    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 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
  • I have no idea what the boxes are?


    Goldman Analysts Hint That Deutsche Bank Should Consider Just Packing It Up And Going Back To Germany

    I realize it doesn’t actually work this way but I always imagine that sell-side analysts at big banks who cover other big banks enjoy sabotaging each other a little. “Take that, you Deutsche Bank jerks!,” Jernej Omahen might have thought as he hit send on this one: Deutsche Bank AG fell the most in more […]

    / Mar 1, 2013 at 1:07 PM
  • Hmm. Anyone got any other ideas?


    Mourn For The Derivative On Its Derivatives That Credit Suisse Wrote To Itself

    You may not believe this, but a few weeks ago I spoke to a business school class about the financial industry, and a student asked me “what would you say to someone who’s considering a career at an investment bank?” Somehow it did not occur to me to congratulate her on her humanitarian impulses. Instead, […]

    / Feb 27, 2013 at 1:23 PM
  • I've  missed you Bob! This is totally unfair, it was before his time; John Varley was CEO. Still.


    When No One Else Would Invest In Barclays, Barclays May Have Just Invested In Itself Itself

    We’ve talked a lot about bank capital today but there’s still time for one quick addendum. First, though, two rough-and-ready equations: Capital = cash paid in by shareholders plus retained earnings Capital ratio = capital divided by assets The first equation explains my puzzlement at the claim that Deutsche Bank “book[ed] a loss to boost […]

    / Jan 31, 2013 at 6:14 PM
  • Banks

    Survey: Investors Expect Banks To Meekly Over-Comply With Regulations Without Pushing Back On Anything

    On Monday, as a bevy of banks were settling a zillion dollars of mortgage lawsuits and putting themselves on a path to (1) certainty and (2) giving money back to shareholders, Goldman released a research note with the results of a survey of investors’ expectations of bank capital return.1 Here is what some sample of […]

    / Jan 9, 2013 at 11:03 AM
  • more cow


    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
  • not to scale


    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
  • Excellent-ish

    Banks, News

    Citi Has An Excellent 88% Decrease In Profit

    I don’t have much insight into Citi’s earnings but I do enjoy the reporting of them. When a car or Facebook company reports earnings you basically ask questions like “how many cars or Facebooks did it sell?” and “how much money did it make on each one?” and those questions are kind of answerable and […]

    / Oct 15, 2012 at 2:10 PM
  • what the?

    Banks, News

    Morgan Stanley Doesn’t Want To Share Custody Of Smith Barney Any More

    Buried in a footnote1 a while back I ruminated on the fact that, in the deal where Morgan Stanley bought a chunk of its Morgan Stanley Smith Barney brokerage JV from Citigroup, Morgan Stanley got a sort-of-free option to buy the rest of Smith Barney, and how that option is (1) valuable and (2) sort […]

    / Sep 21, 2012 at 5:25 PM
  • We've talked before about how I own these cufflinks. Two notable events where I failed to wear them: (1) CFA Level I exam, (2) the time I quit Goldman Sachs.


    Sometimes Companies Buy Low And Sell High

    I liked that the two top articles in Money & Investing in the Journal today were (1) that European banks are buying bonds, and that’s bad, and (2) that American corporates are selling bonds, and that’s bad. And: probably! The European banks are behaving sensibly: With the European crisis knocking down the value of banks’ […]

    / Aug 13, 2012 at 6:02 PM


    You Misplace 5 Or 6 Billion Dollars And All Of A Sudden People Stop Trusting You To Keep Track Of Your Money

    When JPMorgan’s whale drowned a lot of people asked “where were the regulators?” and that was a silly question, because the people with the most incentive and ability to keep the whale afloat were, in descending order, (1) the whale, (2) the whale’s bosses, (3) the whale’s bosses bosses, (4) the regulators, and (5) the […]

    / Aug 10, 2012 at 2:25 PM
  • News

    Swiss National Bank Is On To This “Swiss Banks Are So Great” Scam

    The Swiss National Bank is not particularly thrilled with the state of the Swiss Not-Quite-National Banks and wants them to do something about it: The SNB is therefore of the view that both big banks should further expand their loss-absorbing capital. For UBS, this implies a continuation of its capital strengthening process; and for Credit […]

    / Jun 14, 2012 at 6:01 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

    Marvel At The Derivative On Its Derivatives That Credit Suisse Wrote To Itself

    Financial news is very serious business and you should probably fret more than you do about the economy and the banksters and the muppets and the homeowners and so forth. Some things, though, are best viewed as purely aesthetic triumphs, and your reaction should just be an appreciative whistle. This starts slow but stick with […]

    / Apr 25, 2012 at 4:33 PM
  • News

    Deutsche Bank Is Not Above Shuffling a Few Pieces of Paper To Keep Nosy Regulators From Demanding $20bn in New Capital

    Two things always worth talking about are bank regulation and path dependency so here’s this Journal story about Deutsche Bank that is like ooh-evil-Germans but also kind of meh: Deutsche Bank AG changed the legal structure of its huge U.S. subsidiary to shield it from new regulations that would have required the German bank to […]

    / Mar 21, 2012 at 7:29 PM
  • Banks, News

    BofA’s Success Looks a Bit Worse Than Citi’s Failure

    We’ve talked about the fact that Citi “failed” the Fed’s stress tests in the sense that its plan to return capital was Too Big, and so it got whacked by markets. Bank of America passed with flying colors, so, tiny yaaaaay, but the Journal puts that in context: The situation at Citigroup [what with the […]

    / Mar 15, 2012 at 4:06 PM

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