Christophe Nijdam’s Post

"Li Yunze, the nation’s top banking regulator, said earlier this week that authorities would act to increase core tier 1 capital at its six major commercial banks, without elaborating. The National Financial Regulatory Administration did not respond to a request for comment. China’s mega banks have been under increasing pressure from regulators to shore up the struggling economy by offering cheaper loans to risky borrowers – from real estate developers and homeowners to cash-strapped local government financing vehicles. Most recently, some of the lenders heeded government calls to pay their first ever interim dividends to support the stock market, even as profit growth and margins are sliding." Good move. What took them so long. Let me get this straight. They are going to capitalise the banks to give cheap loans to the developers, and local govts; and homeowners strapped for cash. This is a bailout. Ish. Hey, you had me at bailout. Been saying that all along - since 2021. Now, why did they have to wait till now though and not acted earlier is another bajillion yuan question that will not be addressed. (Also the economy was doing so fine that Beijing had to pump in the juice, lower the rates because they are so generous.) Again USD142b can be worked out into USD1tr or so in liquidity - to solve a USD40tr local govt debt problem and a maybe USD10tr real estate debt. Better than nothing.

The 2007 financial #crisis reignited #debates on government intervention in the financial sector, leading to massive public #funds disbursement to stabilize institutions post-crisis. While interventions restored #confidence and financial #stability, they also strained fiscal #positions of countries like Ireland and Spain and raised #concerns about moral hazard—where banks might take excessive #risks due to public #support. Franklin Allen, Elena Carletti, Itay Goldstein and Agnese Leonello challenge the belief that government #guarantees always lead to moral hazard, encouraging a re-evaluation of their in #preventing banking crises. Oxford University Press Imperial College Business School Università Bocconi The Wharton School European Central Bank #government #intervention #finance #stability #moralhazard https://lnkd.in/eQTqsXSe

Should the Bank of England have tiered remuneration on Commercial Bank Reserve Accounts? In a second blog for Warwick University Business School, published by UK Finance today, I look at the arguments for and against tiered remuneration on the Reserve Accounts held by Commercial Banks at the Central Bank - specifically those at the Bank of England. To find out my conclusion you will have to read the blog! As always, comments and alternative analyses are encouraged. https://lnkd.in/eQRDxEUT

Is Europe’s Financial Stability Being Undermined by Banking Lobby Pressure? It’s becoming clear that governments and regulators across the EU, UK, and US are giving in to pressure from the banking lobby, and this could have serious consequences for financial stability. Draghi’s recent report presented a concerning example, claiming that the EU’s banking regulations are overly cautious. In reality, the EU is at risk of not fully complying with Basel standards, as highlighted by EU banking supervisors in a letter to the European Commission last year. ❗ Myth Busted: There’s a recurring misconception, often pushed by the banking lobby, that stricter capital requirements hurt lending to the economy. This simply isn’t true. In fact, the Bank for International Settlements – BIS analysis of the impact on lending of the post-2008 capital requirement increases has shown that well-capitalised banks are more resilient and better positioned to support sustainable lending. The real problem isn’t that regulation is too strict, but that we’re risking financial stability by weakening these safeguards, just to boost banks’ short-term profitability. And this is happening while Europe’s biggest banks are expected to make a record €50.02 billion in payouts to shareholders this year. Reducing capital requirements to inflate short-term profitability may benefit bankers, but it does so at the expense of broader financial stability. The world has seen where this road leads, and if policymakers don’t address it now, the next financial crisis could be around the corner. 🏦 Bottom Line: It’s time to remember that financial stability is the bedrock of a healthy economy, not an obstacle to growth. 📖 Read more here https://lnkd.in/exbEmYWV Read also Thierry Philipponnat last post on this: https://lnkd.in/etRmJCQH #DraghiReport #Basel3 #nomorecrises #BankCapital #BCBS #Baselframework

In my talk on Thursday, one of the topics I will cover is the risk fiscal dominance may pose to banks, specifically the possibility that the accumulation of government debt and continuing budget deficits can "dominate" central bank intentions to keep inflation low. Fiscal dominance can show up in ways that affect banks -- regulations to hold more government securities, taxes on the banking sector, higher reserve requirements or the elimination of interest on banks' reserve balances. This week the SNB announced an increase in minimum reserves that will have the effect of reducing what Swiss banks earn on balances at the central bank. In 2022 Spain introduced a tax on revenues from interest and fees at Spain's largest banks. Several other European countries, including the Netherlands, Ireland, Slovenia and Belgium, introduced banking taxes in 2023. H/t to Mark for flagging the article on the SNB's announcement. https://lnkd.in/gbrWV__t

My latest IREF article: banking system resilience is a sham based on risk-weighting, where everything shrinks, apart from the risk and the losses... #imf #financialstability #fsb #financialstabilityboard #euro #eurozone #euros #bondmarket #eba #Europeanbankingauthority #Basel III #RWAs #RiskWeightedAssets #npl #npe #NonPerformingLoans #NonPerformingExposures #riskweighting #RWA #VAR #ValueAtRisk #Leverageratio #InternalRatingsBased #IRB #AdvancedInternalRatingsBased #AIRB #LCR #LiquidityCoverageRatio #NSFR #NetStableFundingRatio #stresstest Bank of England Bank for International Settlements – BIS Federal Reserve Bank of New York Federal Reserve Board Silicon Valley Bank First Republic Credit Suisse European Central Bank Eurostat European Banking Authority (EBA) ESM - European Stability Mechanism EFSF - European Financial Stability Facility European Union Financial Stability Board (FSB) European Commission Standard & Poors Ratings Services Moody's Ratings Fitch Ratings Morningstar DBRS Virgin Money Nationwide Building Society Coventry Building Society https://lnkd.in/dkussdk6

Commercial property is weak link in euro zone finance, ECB says Full Article Link >>> https://lnkd.in/gTpa_FqY May 16, 2024 01:35 PM IST ECB-POLICY/REALESTATE (PIX):Commercial property is weak link in euro zone finance, ECB says FRANKFURT, – Commercial property has become the weak link of the euro zone’s financial system, with losses there threatening to hurt banks, insurers and funds, a European Central Bank report showed on Thursday. Commercial property is weak […] . . Latest IND . . . . #trendingnews #newstrending #trendingtopicnews #lifestyle #business #news #healthylifestyle #smallbusiness #supportsmallbusiness #lifestyleblogger #luxurylifestyle #businessowner #businesswoman #smallbusinessowner #businessnews

🇬🇧 #BreakingNews: The Bank of England #BoE kept the #BankRate unchanged at 5% during its 19th September 2024 meeting. 📌 Additionally, the Committee unanimously agreed to reduce its stock of UK government bonds by £100 billion over the next 12 months, bringing the total to £558 billion. #BankofEngland #interestrate #banking #centralbank #monetarypolicy #macroeconomics

Impact of draft legislation on Latvia's Banking Sector: ECB Insights The ECB's recent opinion on the temporary solidarity contribution law (SCL) highlights significant implications of the proposed draft law on monetary policy and financial stability: • Credit Institutions' Operations: Potential decline in profitability could limit lending capacity, affecting the broader economy and long-term State budget outcomes. • Monetary Policy Distortion: The law might disrupt efficient credit allocation, influenced by varying business models. • Pro-cyclical Nature: The law was designed for a phase of increasing policy rates and may be effective during rate hikes, however the law could fail to generate expected State revenues during easing cycles. • Credit Risks: Rebate mechanisms, intended to boost lending, may push institutions towards riskier borrowers, impacting stability. • Competition & Fragmentation: Uneven effects on new versus established institutions may create market fragmentation. • Temporary Nature: The temporary solidarity contribution is implemented for a three-year period, which is long. • Comprehensive Analysis Needed: ECB urges a detailed assessment to understand the long-term impact on financial stability, especially under current geopolitical and market uncertainties. ECB opinion clearly indicated that a thorough approach is crucial to ensure measures support financial resilience without unintended adverse effects. And the list of remarks worth thinking about is substantial. Opinion link https://lnkd.in/dgWBVQ5n