January 11, 2013
Sir, Mary Watkins and Ralph Atkins title their report on the Basel regulators allowing “highly rated…securities backed by mortgages on homes to be included in liquidity buffers that banks will have to hold”, as “Mortgage-backed securities come in from the cold” January 11.
Has everyone already forgotten that it was precisely that kind of regulations, the allowing of absurd low capital requirements for this type of highly rated securities that set us up for the current crisis? And now the regulators want to send these securities back to the ovens, even increasing the temperature by adding the liquidity requirements based on perceived risk? Sincerely the regulators remain as loony as back in June 2004 when they launched their Basel II!
And, again, where do the regulators get to think they are authorized to send those who because they are perceived as “The Risky” already find themselves in the cold, into extreme arctic colds? Can’t they understand that “The Risky”, the unrated or the not- so-good-rated small and medium business and entrepreneurs, are those we most need to care for and nurture when the real economy goes through difficult times? Sincerely, in the name of all those who will not be able to find employment because of these regulations…Damn the regulators!
November 23, 2012
Sir, I refer to Mary Watkins’ “Barclays’ total loss bond poses test for ‘coco’ markets” November 23, as well as to Patrick Jenkins’ “Banks unnerved by BoE’s extreme focus on capital” November 20.
There is something I cannot figure out about these bonds, perhaps you can help me, or perhaps it is just one of those “blind spots” to which Gillian Tett refers to in “Investors must search for the next financial blind spot” November 23.
It states that under the terms of the deal, that the bonds will be automatically written down to zero if the bank's Common Equity Tier 1 ratio falls below 7% , and I assume that this is on a risk-weighted basis since I Barclay surely holds less than 7 percent in capital against all its assets.
If so, what happens if Barclays’ management decides, own its own, to move some assets with low risk-weights, “The Infallible”, which require holding little capital, into assets with a higher risk-weight, “The Risky”, and which therefore require holding more capital, and therefore cause the bank’s Common Equity Tier 1 ratio to fall below 7%?
Or, alternatively, what happens if the regulators decide to change the risk-weights and thereby Barclay's Common Equity Tier 1 ratio to fall below 7%?
If it is as I do not want to believe it is then management (or regulators) can, without Barclays losing a cent on its assets, get all these bonds written off. Sounds crazy! And, if so, would management be able to collect a bonus on that very real profit?
PS. Will shareholders require management to adjust the bank portfolio in such a way that Barclay's Common Equity Tier 1 ratio falls below 7% and it does not have to repay the bondholders?
PS. Will bondholders require management to adjust the bank portfolio in such a way that Barclay's Common Equity Tier 1 ratio stays over 7%, so that they will be repaid?
PS. Have regulators now been de-facto impeded to change the risk-weights?
PS. Who is going to sue who?
October 26, 2012
Europe, if banks travel with Draghi, with whom does small European businesses and entrepreneurs travel?
Sir, Ralph Atkins and Mary Watkins “Eurozone banks start long road back to health” October 26 is an example of excessive focusing on the banks, as if the banks could become healthy in an unhealthy economy.
In Europe, strict followers of Basel II, years of discrimination against the access to banks credit by “The Risky”, like the small businesses and entrepreneurs, must have done a lot of damage to the ecosystem of Europe’s economy. To recover might need decades of bank lending not distorted by regulations, and seemingly regulators (just like FT experts) have not even catched up to the fact they were distorting, and much less stopped to do so.
We read banks and financers expressing “with somebody as powerful as Draghi, we’ve travelled a long way”. That is great, but, tell me, with who are the small European businesses and entrepreneurs supposed travelling?