You can’t argue too much with the SEC’s gentle suggestion that maybe banks should tell people, in a consistent format, what’s up with their European debt exposure. It seems to be a thing that is on investors’ minds, so why not have the SEC try to put their minds at ease:
“Our staff has been working with banks to improve their disclosure about sovereign-debt exposure for several months,” SEC Chairman Mary Schapiro said in a written statement released Monday. “Even so, I understand this is an area of focus and uncertainty that could really benefit from further transparency and consistency, particularly as we head into annual reporting season. I think the staff’s guidance should help achieve that goal.”
Yep. The release is here and contains a good list of things you might want to know, including things like “The effects of credit default protection purchased separately by counterparty and country,” “The fair value and notional value of the purchased credit protection,” and “The types of counterparties that the credit protection was purchased from and an indication of the counterparty’s credit quality.” It’s not exactly a standardized form for disclosure that will allow everyone to do detailed comparison among the banks and/or sleep well at night, but it should at least shame people into giving reasonably detailed substantive information so that when your bank blows up you at least won’t be surprised at which European country did it. That seems good. It even seems like what the SEC is supposed to do.
The Journal, ever fair, finds a token objector, sort of: Continue reading »
So Europe’s all better now, or something. The banks are anyway. They have had the money flung at them, in the form of the European Central Bank advancing them tons of medium-term funding at attractive rates and with pretty chill collateral requirements, and now they just have to sit back and be awesome.
Since they’re now all flush and awesome, various people have come out of the woodwork to help them spend their money. (I’m happy to help too! Call me!) One possible answer is “bail out your reprobate governments,” which FT Alphaville have dubbed the “Sarko trade” after a guy who said this:
French President Nicolas Sarkozy said the ECB’s increased provision of funds meant governments in countries like Italy and Spain could look to their countries’ banks to buy their bonds. “This means that each state can turn to its banks, which will have liquidity at their disposal,” Sarkozy told reporters at the summit in Brussels.
Alphaville point to a equity research note by Morgan Stanley, who estimate that the size here is maybe less than Sarkozy hoped for but much, much more than zero. You can have various views on the desirability and/or plausibility of this.
Another thing the banks could do is take all these gobs of money and actually go lend it to people to, like, buy Portuguese villas and stuff. This seems very broadly speaking like a good thing for them to do, since banks lending to people and businesses is sort of their job. One guy likes this idea: Continue reading »
We don’t spend much time with Jean-Claude Trichet, the president of the European Central Bank, and really that’s our loss because he is quite the charmer, though less seductive and/or rapey than other French international bankers who come to mind. Last week he sat down with a French magazine for an interview that was released yesterday, and he had a message for anyone who might still want to speculate on Greece defaulting:
Continue reading »
If the European Union isn’t regulating, it isn’t happy.
Stymied by fear and common sense, the EU seems likely to drop the most odious aspects of its proposed new rules on hedge funds and private equity firms. But the Europeans have simultaneously struck upon the only thing more likely to drive hedge funds out of Europe than strict oversight: draconian pay restrictions. And now it’s turned its sights on the insurance industry.
The president of the European Central Bank today backed plans to place new encumbrances on the continent’s economy by regulating big insurers the same way it regulates banks. After all, can’t those insurers be just as “systemically relevant,” á la AIG?
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Furthering the U.S. Euro divide on financial crisis (non)response, the ECB is not having any more of this private asset buying crap. And, you will be happy to know, the incident many refer to as a “credit crunch” or “credit crisis” is absolutely, positively over. Got it? Over. Done. Finished. Ceased to be.
European Central Bank Governing Council member Axel Weber said he sees “no need” for the ECB to buy further private assets to support lending.
“I currently don’t see the need for outright purchases of further private debt obligations,” Weber said in a speech in Munich today. “There is no credit crunch in the euro area; therefore, there is no reason why we should surpass the banking system with our monetary-policy instruments.”
Well, since that’s over….
ECB’s Weber Sees ‘No Need’ for More Purchases of Private Debt [Bloomberg]
Trichet said it was difficult to describe the euro as weak after its 6.2 percent drop against the dollar this year.
When the euro was introduced, it was 1.17 to the dollar, now it’s about 1.31 so “to speak of a euro that is weak doesn’t reflect the present situation,” Trichet said.
Perhaps we’ll have to speak instead of a euro that is:
Flaccid
Limp
Exsanguinated
Stricken
Diseased
Drained
Torpid
Insubstantial
Trichet Says ECB Must Do Everything to Restore Confidence (like preventing people from using the word “weak” in its connection?) [Bloomberg]
The audience able to take advantage of the morning’s European rate cut was almost entirely composed of the vanishingly small community of insomnia plagued index futures traders, and even that crowd better have taken their gains quickly, as the advance had all but evaporated by the open.
This shouldn’t surprise anyone. Markets have priced in “regulatory miracle work” to such an extent at this point that short of turning water into warrants we can’t see how any major financial authority can even make markets crawl out of their crate, much less sit up, roll over and fetch.
Several commentators have already called the “fiscal bag of tricks” top (erroneously in our view until this week) and expect that further government intervention will effectively be useless. The United States has perhaps another cut left in it, but that’s probably about it. And then? Well, that depends on your view of future earnings and the like. If you think that commercial real estate is going to be just ducky, that LBO loans outstanding will be just fine because their covenants are oh-so-light that acceleration, or default won’t be triggered so easily (though this fails to explain how slowdowns in loan payments won’t slug bond holders anyhow) and consumer confidence will suddenly rebound when Britney’s father hands control of the estate back to the hedonistic pop-star, and commodity prices, currently in a holding pattern over KREC (Recession National Airport), will remain orbiting forever, well, you probably won’t mind going long today.
The Bank of England surprised markets with a sweeping one-and-a-half percentage point interest-rate cut Thursday, as central banks in Europe slashed their key rates to stave off deep and prolonged recessions.
The Bank of England cut its key lending rate to 3% from 4.5%, signaling deep concern as the British economy struggles with falling house prices and sharply tighter credit conditions.
The European Central Bank, which makes monetary policy for the 15 countries that share the euro currency, cut its key rate by half a percentage point to 3.25%, as expected. Switzerland’s central bank joined in, cutting its key rate target by half a percentage point to 2% in an unusual between-meeting move.
Europe’s Central Banks Slash Interest Rates [The Wall Street Journal]
