Subdued debt issuance is expected from EU financial firms | Eurozone lending declines again | Banks newly aggressive in lending as regulations bite
January 8, 2013
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Subdued debt issuance is expected from EU financial firms
Europe's largest banks are expected to continue deleveraging balance sheets in 2013. Consequently, investment bankers do not anticipate much debt issuance from the financial-services sector. Debt securities issued by banks in 2012 declined 7% compared with 2011, according to Dealogic. Sebastien Domanico of Societe Generale says banks have reduced balance sheets on average about 30% during the past three years. Financial News Online (U.K.) (subscription required) (1/4)
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Eurozone lending declines again
Loans to the private sector in the eurozone fell 0.8% in November, extending October's decline, the European Central Bank reported. The data suggest more interest-rate cutting by the central bank is in order. "The concern is that a number of companies who do want to borrow ... and are in decent shape are finding it hard to, so tight credit conditions are handicapping eurozone growth prospects," IHS Global Insight economist Howard Archer said. The Irish Times (Dublin)/Reuters (1/3)
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Banks newly aggressive in lending as regulations bite
Big banks are looking to counter money lost due to new regulatory regimes by expanding their lending, with some of the biggest players moving aggressively onto competitors' turf. But the new playing field is expected to create "great pricing pressure," observes Terry Turner, chief of Pinnacle Financial Partners, noting that "the only way to grow loans is to take them away from someone else." The Wall Street Journal (tiered subscription model) (1/1)
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Credit Suisse uses employee bonuses to unload risk
For 2012 bonuses, Credit Suisse plans to continue bestowing on top executives asset-backed instruments that offload risk onto employees. The move, while a clear win for Credit Suisse, has benefited managers also when the risk pays off, sometimes returning as much as 80%. Reuters (1/3)
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Analysis: New rules for derivatives favor platform consolidation
Derivatives are at the core of the merger of NYSE Euronext and IntercontinentalExchange, Helen Bartholomew writes. The regulatory push to get derivatives centrally cleared opens up new business lines for exchanges with a global reach, product breadth and cutting-edge technology, and those elements combined allow exchanges to create and list "contracts that mirror the economics of [over-the-counter] derivatives," Bartholomew writes. International Financing Review (free content) (1/5)
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Experts fear another Greece as Japanese debt soars
Japan's government debt, largely unnoticed as Europe and the US struggle with financial problems, has expanded to monumental proportions and might be impossible to sustain, according to Der Spiegel. Economists are warning that Japan could become the next Greece. Japanese debt amounts to 230% of gross domestic product, compared with 165% for Greece. Der Spiegel (Germany) (English online version) (1/3)
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Regulatory and Accounting Issues
Banks win delay and phase-in for Basel LCR
The Basel Committee on Banking Supervision has granted a four-year reprieve and phase-in period for its liquidity-coverage ratio, a step that banks had argued was necessary to sustain lending. Originally, banks were required to have in 2015 sufficient liquid assets to cover expected outflow over 30 days. The date for that has been changed to Jan. 1, 2019, with banks needing to show a 60% ratio in 2015. Financial Times (tiered subscription model) (1/6), Reuters (1/6), The Wall Street Journal (tiered subscription model)/Dow Jones Newswires (1/6)
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Basel panel's allowance of MBS in buffers faces scrutiny
The Basel Committee on Banking Supervision's decision to let banks include equities and residential mortgage-backed securities in Basel III liquidity buffers is gaining plaudits and criticism. Bankers welcome the revision, but experts say it is unlikely to significantly lift a slack securitization market. The change also presents challenges for regulators, experts say. (subscription required) (1/7), Financial Times (tiered subscription model) (1/7), Financial News Online (U.K.) (subscription required) (1/7)
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Basel liquidity reprieve prompts relief and concerns
The Basel Committee on Banking Supervision's decision to give global banks an additional four years to meet liquidity requirements was aimed at ensuring the change wouldn't discourage lending to the real economy. Some banks have already benefited from the revision, with their share prices increasing. However, the move could prove costly for financial institutions, analysts say. Financial Times (tiered subscription model) (1/7), Reuters (1/7)
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Commentary: Economic worries drive Basel decision
The Basel Committee on Banking Supervision's decision to loosen an upcoming liquidity rule highlights its concerns about the global economy, Brooke Masters writes. Financial Times (tiered subscription model) (1/6)
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Foreign banks get no relief on swaps push-out
The Office of the Comptroller of the Currency has repeated a mistake embedded in the Dodd-Frank Act concerning foreign banks, Matt Cameron writes. Non-U.S. financial institutions that conduct swaps in their American branches still will have to shift those activities into a separate legal entity by mid-July. U.S. banks can get a three-year "safe harbour" from the rule, Cameron writes. (subscription required) (1/4)
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Cross-border regulation creates challenges
During the past year, regulators have clashed publicly and privately over harmonizing rules from different countries. In 2013, it will be crucial for negotiators to establish a framework to resolve extraterritoriality issues concerning areas including derivatives trading and capital requirements, Michelle Price writes. Financial News Online (U.K.) (subscription required) (1/7)
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Coming attraction in 2013: Regulatory changes
This year is overflowing with regulations, including the revised Markets in Financial Instruments Directive and the European Market Infrastructure Regulation. There are significant changes to matters including capital, liquidity, transparency and oversight. Here's a month-by-month guide to help navigate all of the changes. Financial News Online (U.K.) (subscription required) (1/7)
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A blunder at the right moment is better than cleverness at the wrong time.
Carolyn Wells,
American author and poet
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