Now is not the right time for European banks to make payouts to their shareholders.

Sir, Richard Milne reports “Shareholders press Swedish banks for payouts”, October 25.

According to recent indications from the Basel Committee, banks will have to publish their leverage ratios in January 2015, which means that their un-weighted assets to capital ratios will be seen.

If European bank shareholders only knew how important, for the competitive strength of their banks, it will be to then be able show up strong ratios, in the midst of that market panic that could result from unveiling the scary truths, they would not be asking for any payouts now.

How will markets react when informed that Deutsche Bank is leveraged 33 to 1?

Sir, Daniel Schäfer, on July 22, reports that Deutsche Bank is to cut assets for stricter capital rule aiming for a 3 percent loan to equity ratio. And “stricter” is there sort of laughable.

On January 2015, according to the Basel Committee, banks will have to report their straight leverage ratio. Can you imagine how Deutsch bank creditors, made aware they should not expect to be bailed out, will react when they read that Deutsch Bank is leveraged 33 to 1?

If 33 to 1 leverage is stricter, how flexible is it now?

Higher capital will soon turn into banks’ new competitive edge.

Sir I refer to Tracy Alloway’s and Patrick Jenkins’ “US banks face strict leverage proposals” July 10.

At this moment, when warning signs stating “bank creditors, caveat emptor, you won’t be bailed out like before” are being put up all over the world, starting in Cyprus, banks have to be truly insane not knowing they have to substantially raise their capital.

In this respect, though some dumb US banks are complaining that their regulators, are setting too high capital requirements for them, these might turn out to be a blessing in disguise… and perhaps soon all will understand that those even higher ratios favored by FDIC’s Martin Gruenberg and foremost Thomas Hoenig, make all sense in the world.

Just wait until the recent decision of the Basel Committee about having to publish the leverage ratio comes into effect. Then there is a lot of bank-running that is going to be happening from those banks leveraged over 30 to 1 to those banks leveraged 10 to 1, and this no matter the riskiness of the underlying assets.

Frankly, European banks should beware

What does Martin Wolf know we don’t? It would seem very important to know

Sir, Martin Wolf holds that the Fed, and especially Bernanke, must be much more careful because “Careless talk may cost the economy” June 26. He is correct, but perhaps we should remember that careless actions might cost the economy even more, but, then again Wolf seems to know something that I, and may I say we don’t.

For instance, banks can lose fortunes by investing in fixed rate long term bonds when interest rates go up (just look at the chart he provides us with) but, in Martin Wolf’s opinion, “This is purely market-risk, not credit risk. That can be managed by a mix of lower leverage and, if necessary, regulatory forbearance.” And at least I just don’t get it.

Also Wolf holds that “It is unlikely that markets would cease to fund systemically significant financial institutions that have only mark–to market losses on safe haven government bonds”… and which must also mean he believes that the market would go on financing those banks at the previous low rates. And again, I don’t get this either.

And, just in case the market would not want to cooperate with the banks, Wolf argues that “the authorities will need to have plans to address such an eventuality”. What plans? To help banks unload all this I don’t could be worthless paper on some others? Or a Quantitative Easing II, the Fed buying those bonds from banks at way above market value? And so again, I am sorry, but I just don’t get this either.

But when Wolf writes “the likely result of a credible exit [of the US quantitative easing program] will be a shift towards assets in the recovering high-income economies”, that I do understand, even though that would normally go under the name of inflation, and that would most likely also be the result of a not-credible exit or even just a “tapering” down.

Since Martin Wolf seems to know so much more at least I would much appreciate if he were to provide us with further clarifications.

By the way, should not someone who can influence opinions as much as Martin Wolf, need to make a disclosure of his own investment portfolio? Perhaps that information could also help to enlighten us all.