Tag Archives: Banks
If it’s 2008 redux, there is one big difference. It’s Summer not Fall.
Posted on 12. Jun, 2012 by Harvey Sax.
Everyone is nervous about Europe. Me too. I have no way of knowing how much of this is already priced in the market. You’d have to say a lot based on the violent reaction in the oil patch, some European markets but I don’t see any positive outcome from this weekend vote in Greece. If they vote to keep the austerity demands in place, brief rally and the market will soon say the economy is just going to at best muddle along and at worse, be right back at the bread line. On the other hand if they abandon austerity, there is likely to be some kind of Euro shock although it could be brief followed by a very sharp rally if Germany agrees to tighter fiscal ties. From what I can gather the Germans are done with the Greeks and might be willing to be more cooperative with the ECB if they’re gone. A lot of what ifs and no way for me to have any edge. If it’s 2008 redux, there is one big difference. It’s Summer not Fall.
Banks Overwhelmed by Mortgage Refinancing After Job Cuts
Posted on 02. Sep, 2011 by Maxwell Leary.
Sept. 2 (Bloomberg) — Mortgage rates near historic lows have sparked a refinancing boom that has U.S. lenders struggling to handle the surge.
“There’s just so much volume,” said Kristin Wilson, a senior loan officer in Bloomington, Minnesota, for Fairway Independent Mortgage Corp., who has seen clients seeking lower rates climb to about half of her business from 20 percent a month ago. “We can’t just ramp up by hiring inexperienced people because they don’t know what they’re doing.”
The lending logjam extends to the nation’s biggest banks, which fired thousands of mortgage workers after interest rates rose in November through February, chilling refinancing demand. Now, the time needed to close a loan has as much as doubled to 60 days, according to Wilson and other bankers, and lenders are holding some mortgage rates higher than they could be to slow the torrent of customers, data show.
Refinancing applications are up 83 percent from this year’s low in February, according to an index compiled by the Mortgage Bankers Association, a Washington-based trade group. After topping 5 percent that month, the average rate on 30-year fixed loans fell two weeks ago to 4.15 percent, the lowest in surveys dating back to 1971 by Freddie Mac, the second-largest U.S. mortgage-finance company.
Full article available @:
Banks Lead Greece Recovery
Posted on 30. Aug, 2011 by Live Trading News.
Greek stocks rallied, with the benchmark ASE Index climbing the most in more than 21 yrs, as EFG Eurobank Ergasias SA (EUROB) and Alpha Bank SA announced a merger.
Eurobank and Alpha Bank each rose by the allowed daily limit of 30% after saying they will combine and sell new equity to strengthen their capital in an attempt to weather the debt crisis. Larger rival National Bank of Greece SA (ETE) gained the most on record while Piraeus Bank SA (TPEIR) had the highest advance in almost 18 yrs.
The ASE rose 14% to 1,006.59 at the 5 p.m. close in Athens Monday, the best daily performance since April 1990.
The benchmark gauge is still off 81% since October 2007 and is the worst performer in Y 2011 among 24 developed-markets indexes as the Global financial crisis and Greece’s debt woes eroded the value of the Country’s banking assets.
The 22-member Cyprus General Market Index rose a record 18% Monday.
Greek government bonds have dived, pushing the 2-yr Note yield as high as 46%, after the Country was bailed out twice by European Union partners as it struggled to service its debt.
Alpha Bank rose 30% to 2.47 Euros today and Eurobank gained 29% to 2.24 Euros.
Futures on Alpha expiring September 21 and giving the right to 1/shr each rose 57% to 3.02 Euros.
Alpha, the southern European country’s 3rd largest bank, will acquire Eurobank, the 2nd biggest, to create the Nation’s biggest lender as the firms seek to ride out a deepening recession and the Country’s sovereign debt crisis.
The combined bank will strengthen capital by 3.9-B Euros (US$5.7-B), including a 1.25-B Euro rights offering, a 500-M-Euro convertible note to be taken up by Qatari-backed Paramount Services Holding Ltd. and 2.1-B Euros of internal measures, the 2 companies said Monday.
National Bank, Greece’s largest lender, closed 29% higher at 3.59 Euros, the biggest gainer since trading started in Y 1992, after earlier rising 30%. Piraeus Bank gained 29% to 0.72, the highest advance since December 1993.
Paul A. Ebeling,Jnr.
Global Baking Regulation Update
Posted on 22. Aug, 2011 by Live Trading News.
Enhancing financial regulation has been a common view between governments since crisis in Y 2008, but debates over implementation details continue, especially since the recent debt crisis has given rise to Double Dip recession danger.
Bankers and financial experts have agreed that the Global banking system needs prudent regulation, but how to strike a balance between regulation and financial innovation is Key issue not yet solved..
Dai Peng, an official with Export-import Bank of China, one of China’s policy banks, said at Saturday’s 5th Annual Bankers Forum that increased regulation and financial innovation should receive equal attention in the reform of international financial reform.
“The last round of financial crisis is the consequence of ultra market liberalism of the Western countries, which need strict regulation badly,” he said. But for emerging economies with under-developed financial markets, innovation should be encouraged to ensure a healthy market.
The G-20 leaders approved to the Basel III framework at the end of last year, the new Global standards for banking which requires higher capital adequacy ratios for commercial banks.
There should not be a universal standard for all the banks, which could discourage the economic development in emerging markets and in turn hurt global financial stability, he said.
China should work out its own regulating system that betters the development of the Country’s industry, instead of following the regulation standards of the Western countries, he added.
But according to Fan Gang, a former advisor for the People’s Bank of China, the Country’s central bank, emerging economies should be more prudent than developed ones, as they are more vulnerable to external risks.
More “Hot Money” has flowed to emerging economies, and brought about inflation ever since the United States conducted near-Zero interest rates, and opened the faucet for excessive liquidity to the markets, said Fan.
When crisis comes, developing countries are less capable of self-adjusting, which requires more prudent spirit to protect the economy’s operation, he said.
Also, Xu Xiaonian, a professor at China Europe International Business School and also a well-known economist, said it is actually the government that needs the most supervision, especially when the US Federal Reserve created the Y 2008 financial crisis and the recent debt crisis with over-liquidity in the market and near-Zero interest rates.
Xu pointed out that while conducting financial regulation, there should be a clear boundary between the role of government and that of the market.
“The government should be responsible for establishing a framework and setting up standards, but not interfering market operation,” he said at the forum
Xu said the problem with China’s system is that there are too many departments that regulate 1 market, which brings more complication and less efficiency.
“Regulators are after risk less operation, but being risk less equals to profitless,” he said “You have to let market competitors to make mistakes and learn,” said Hong Qi, Managing Director and President of the China Minsheng Bank.
Regulators should rather focus on enterprises with flaws in management and equity structures, said Xu.
According to Dai, a stable financial market does not equal risk free, but a flexible market that would be less hurt by crisis.
Regulators should pay more attention on boosting financial institutions’ profiting abilities to fight risks.
Paul A. Ebeling, Jnr
Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.
Fed concerned about European banks’ U.S. units
Posted on 18. Aug, 2011 by Maxwell Leary.
(Reuters) – The Federal Reserve Bank is taking a closer look at the U.S. units of Europe’s biggest banks, concerned that a euro zonedebt crisis could spill into the U.S. banking system, the Wall Street Journal reported.
The $2.5 trillion U.S. money market funds industry — which supplies short-term dollar funding to banks — has retreated from the euro zone in recent months, concerned that the continent’s debt crisis is spiraling out of control.
That and the drying up of interbank lending has led to a trebling of dollar funding costs for euro zone banks in the last month. One bank was forced to borrow dollars at the European Central Bank on Wednesday.
In a dramatic shift, the U.S. branches of foreign banks became net borrowers of dollars from their overseas affiliates for the first time in a decade, Federal Reserve data released last week showed.
The Fed’s New York branch — which oversees U.S. units from many European banks — is now asking for more information about whether the banks have reliable access to the funds needed to operate in the United States, the Wall Street Journal said.
New York Fed officials “are very concerned” about European banks facing funding difficulties in the United States, a senior executive at a major European bank who has participated in the talks told the Wall Street Journal.
The New York Fed was not available to comment.
On Wednesday, one euro zone bank borrowed $500 million from the European Central Bank at a rate much above those at which banks can get dollars in the open market. It was the first time since February 23 a bank used the central bank’s facility.
Fed officials recently have held meetings with U.S.-based executives from top European banks to discuss their funding positions, the Wall Street Journal said.
Full article available @:
Small Firms Hunger for Sales, Not Credit .
Posted on 05. Aug, 2011 by Maxwell Leary.
Small-business lending has been in trouble, but is there an explanation beyond the widespread perception that banks are denying credit, and starving small entrepreneurs?
Clearly, the financial crisis and recession whacked banks and curtailed lending to small companies. Lending still hasn’t returned to prerecession levels.
![[JohnB_icon]](http://sg.wsj.net/public/resources/images/HC-GP719_Shippi_BV_20110516180921.gif)
But here’s an alternative view of the principal cause: A range of observers report that, in many cases, small businesses don’t want loans. Their sales are so weak they can’t justify taking on debt to expand operations.
“It’s the sheer lack of expectation that they’re going to grow their company,” says Bernie Kuechler, of Barlow Research Associates, which does market research for the banking industry. “A major driver is that companies are not applying for credit.” Barlow defines small businesses as companies with annual sales between $100,000 and $10 million.
Full article provided @:
Fed Readies Guidance for Banks in Event Aug. 2 Deadline Missed
Posted on 29. Jul, 2011 by Maxwell Leary.
July 29 (Bloomberg) — The Federal Reserve is preparing guidance for banks in the event the U.S. debt limit isn’t raised and the Treasury Department runs out of money to pay all of its bills, a government official said.
The guidance would cover issues including how payments are made, collateral pledged for loans as well as other supervisory and regulatory matters, said the official, who asked not to be identified because congressional negotiations on the debt limit are still under way.
A credit-rating downgrade of U.S. Treasury securities caused by a failure to lift the $14.3 trillion debt ceiling would affect collateral pledged for loans.
The stalemate, if it extends past the Aug. 2 deadline, would probably create turmoil in financial markets, which could cause banks and other companies to hoard cash, William Poole, former president of the Federal Reserve Bank of St. Louis, said in an interview.
Full article can be found @:
USA Regulators Punish Banks
Posted on 25. Jul, 2011 by Live Trading News.
US regulators are straining to keep pace as they write more than 200 rules to rein in risk-taking throughout the financial system.
A year after the enactment of the Dodd-Frank financial oversight law, regulatory agencies have finalized only a handful of reforms (50) but are expected to pick up the pace during 2-H of the year.
Lobbyists and Wall Street executives, as part of their efforts to delay and scale back reforms, are raising pointed questions about whether Dodd-Frank will hamstring the economic recovery. A broad rollback of reforms is not expected, at least in the near-term.
Here is a view of some Key regulatory reform areas:
The new Global Basel III pact, approved by the G-20 last year, is forcing big banks to thicken their capital cushions, with US banks generally further along than their non-US counterparts.
In June, Basel negotiators released a plan requiring global “systemic” banks; a group expected to include JPMorgan Chase & Co (NYSE:JPM), Bank of America Corp (NYSE:BAC), Citigroup Inc, (NYSE:C) Goldman Sachs Group Inc (NYSE:GS), Morgan Stanley (NYSE:MS) and Wells Fargo & Co (WFC), to hold up to an additional 2.5% capital buffer. Another 1% Surcharge would be imposed if a bank becomes significantly bigger. That would come on top of the minimum 7% risk-based capital requirement for all banks.
US regulators are expected to start writing rules in the next few months, largely in line with the Basel agreement.
Dodd-Frank does not explicitly cap bank pay. Instead, it tries to remove financial incentives for bankers to take big risks that prioritize short-term profits regardless of those bets’ long-term performance.
The law requires regulators to regularly review financial firms and prohibit any pay practice that “encourages inappropriate risks.”
Beyond that, US regulators proposed that executives at the largest financial institutions, such as Bank of America and Goldman Sachs, have 50% of their bonuses deferred for at least 3 yrs.
The reform lines up with a G-20 agreement. The European Union (EU) has gone further, setting in law specific limits for cash elements of compensation.
Only the United States has a solid new government process; other than bankruptcy or more bailouts for dealing with large financial firms in distress.
Known as orderly liquidation, it was part of the Dodd-Frank reforms. Critics say it will not work, while proponents argue it is a viable strategy for ending the problem of “too big to fail.”
US regulators are still finalizing a related rule on tagging some large firms as “systemic risks” to stability and subject to tougher oversight under Dodd-Frank. Insurers, mutual funds and hedge funds are trying to dodge the label, which will not officially be applied until later this year at the earliest.
The G-20 has only recommendations in this area, and hopes to approve some measures by the end of Y 2011, which could be introduced over several years. The EU has outlined plans, and will propose a draft law later this year.
A Worldwide push is under way to redirect much of the Over-The-Counter market for derivatives through exchanges and central clearinghouses, with stronger capital buffers.
The G-20 wants standardized contracts trading on exchanges or electronic platforms and centrally cleared by the end of Y 2012. The EU has a draft law to implement the G-20 pledges.
Reforms along these lines are being implemented by the US Commodity Futures Trading Commission, (CFTC) which has 1st drafts of all the major rules.
The Securities and Exchange Commission (SEC) has created parallel reforms for security-based derivatives.
Delays and congressional threats to throttle the agencies’ funding have slowed their work. The CFTC currently expects to finalize most of its rules before Y 2012.
The Volcker Rule, named after former US Federal Reserve Chairman Paul Volcker, bans banks from trading for their own profit in securities, derivatives and certain other financial instruments.
An initial proposal is expected this Summer, with a final rule due by October.
Banks such as Goldman Sachs have already shut down their stand-alone proprietary trading desks since Dodd-Frank was enacted, but regulators have yet to define what trading is still permissible.
The Key question is what will define trades that are intended to make a market for a client, a revenue-rich business that banks are not eager to see curtailed.
Foreign regulators have not introduced a similar restrictions, raising concerns that US firms will be put at a competitive disadvantage and the business will be up for grabs outside the US.
Paul A. Ebeling, Jnr.
Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.
Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.
The Japan Investor – You Need One Megabank
Posted on 30. May, 2011 by Darrel Whitten.
Japanese Banks
If You Buy Japan Recovery, You Need One Megabank
May 30, 2011
As outlined last week, global fund managers continue to be constructive about Japanese equities, despite the lackluster movement in Tokyo stocks, the continued strength of JPY/USD since the Tohoku Disaster on March 11, 2011 and the greater-than-expected decline in Japan’s economy. Tokyo Stock Exchange data show no abatement of record net buying of Japanese equities over the past couple of weeks, particularly from North American investors.
The bear case against Japan is extensive, well-chronicled and to many, persuasive. But value investors say the macro story obscures the many individual company opportunities that fit classic value investor criteria. Japanese equities are attractive to such investors because, a) valuations for Japanese securities are on the whole very cheap. While Japan may be a classic value trap, the yen is near its strongest level against the dollar since 1995. Then Japanese stocks staged a strong rally when JPY rolled over. b) More Japanese companies are recognizing shareholders as important stakeholders in their businesses by sharing profits through increased dividends and stock repurchases. c) Japanese companies are deriving new growth from some of the world’s fastest-growing economies in East Asia.
We have been consistently bearish on Japanese megabanks as chronic destroyers of shareholder capi
via The Japan Investor – Your own weekly strategist, guiding you to profitable Japanese Stocks.
On Systemic Risk
Posted on 16. May, 2011 by David Merkel.
There are five factors for systemic risk. Here they are:
- Asset size of the institution, including synthetic exposures.
- Degree of leverage of the institution, including synthetic exposures.
- Asset-Liability mismatch, particularly financing long assets with short liabilities (including derivatives and margin agreements — think of AIG, or mortgage REITs on repo).
- Degree to which the institutions owns financial companies equity or debt, or vice-versa, where other financial companies have claims on the institution in question.
- Riskiness of the assets owned by the institution in question.
Contributing to the risks include easy monetary policy, which can lead/has led to the neglect of risk control. Personally, if I were a regulator of systemic risk, I would throw my effort at companies that fit factors 1 and 2, and analyze them for the other three factors.
Systemic risk is layered levered credit risk. A lent to B, who lent to C, who lent to D, who financed a bunch of bad mortgages.
#5 is underwriting risk
#4 is connectedness risk
#3 is liquidity risk
And The Worlds Strongest Banks Are…
Posted on 13. May, 2011 by David Spinowitz.
Out of this list of the World’s strongest banks the U.S. only has three: Fifth Third Bancorp (No. 7), JPMorgan Chase & Co. (No. 14) and Citigroup (No. 16)….Citigroup?!?!?! 
Source: Bloomberg (Singapore’s OCBC Strongest Bank as Canadians Dominate )
Reforming the banks
Posted on 05. May, 2011 by Michael Pettis.
I just got back from a very interesting but hectic week in New York and Washington, followed by two days at a conference in Hangzhou. During my meetings I noticed that much of the discussion, and many of the questions I was asked by both government officials and investors, focused on debt levels and reforms in the Chinese financial system. I have written a lot about rising debt in China and am glad that analysts and policymakers seem to be spending a lot more time thinking about balance sheet issues. Every case of rapid, investment-driven growth in the past century, as far as I can make out, has at some point reached a stage in which debt levels rose to unsustainable levels and precipitated either a debt crisis or a long grinding adjustment period.
The reason debt levels always seem to grow unsustainably, I suspect, is that in the initial stages of the growth model much if not all of the investment is economically viable as it pours into building necessary infrastructure whose profits and externalities exceed the cost of the investment. The result is real growth. At some point, however, the combination of subsidies, distorted incentives (in which investment benefits accrue to those making the investment while costs are shared broadly through the banking system), and very cheap financing costs leads inexorably to wasted investment and debt rising faster than asset values. This is when the debt burden begins to rise in an unsustainable way.
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