6/10/17: Italian Banks Tested EU Banking Reform. It Failed.

My article on the patent failures in the EU Banking Crisis resolution reforms exposed by the 2017 events surrounding Italian banking sector is out via @ManningFinancial http://issuu.com/publicationire/docs/mf_autumn_2017?e=16572344/54030271.

10/2/2014: Six Years to Admit the Obvious? Call in Europe...

There are two things to be said about the latest comments from Euro area's chief banking regulator, Danièle Nouy issued recently (see FT's piece from yesterday: "Let weak banks die, says eurozone super-regulator" for more):

• They are so trivially obvious, that given it took EU 'leaders' 6 years to come up with them, one has to wonder if the EU mandarins have any capacity to supervise banks in the first place, and
• Danièle Nouy deserves praise for speaking to the reality.

Here are the main points of what she said:

1. “One of the biggest lessons of the current crisis is that there is no risk-free asset, so sovereigns are not risk-free assets. That has been demonstrated, so now we have to react.” Correct. But don't expect any change soon. 
2. On the upcoming ECB tests: some banks need to fail for tests to be credible. 
3. “We have to accept that some banks have no future,” she said, parrying speculation that a wave of consolidation could save the currency bloc’s weakest lenders. “We have to let some disappear in an orderly fashion, and not necessarily try to merge them with other institutions.”

You'd think all of the above should be trivial. And you would be right. Which makes the fact that these statements are front-page news in Europe ever so more amazing.

15/9/2013: BIS Quarterly: a tale of two banking systems

Two hugely revealing charts from the BIS Quarterly Review, September 2013 (http://www.bis.org/publ/qtrpdf/r_qt1309e.pdf) show exactly the remaining adjustments yet to be undertaken by the banking sector in Europe, compared to the US.

Here they are:

 and

 
note how European banks lag US banks in assets deleveraging, and in raising capital, and are slightly lagging in terms of changes in the ratio of risk-weighted assets. In risk-weighted capital ratios, the european banks are about 1/3rd of the way shy of the US, and in terms of capital, roughly 1/2 of the adjustment to the US levels is still required.

And per operational weaknesses of the European banking system? Next we have a table:

Although different across periods, the divergences between the European and US banks are still qualitatively the same for pre-crisis and crisis periods. In particular, US banks operate at higher cost than European ones, but generate more interest income and other income.