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India broke with its traditional instincts last week by scrapping a restriction on retail investors buying Basel III bonds. Not only is the U-turn in attitude towards retail protection startling given the country's past attitude to that investor base, but it could also be reckless. -
The European Central Bank’s announcement of a third covered bond purchase programme is destined for failure. The size of the public market for benchmark covered bonds stands at €570bn, suggesting the central bank would be unable to achieve anything close to its €500bn target through covered bonds alone.
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You do not spend just short of two decades in two of Europe’s top debt capital markets syndicate teams if you crumble under pressure.
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The inchoate additional tier one asset class is highly complex and comes with many risks, and recent volatility shows it may also be prone to panic attacks. One way to help ensure it remains liquid, correctly priced and, most importantly, as stable as possible is to give investors the ability to accurately hedge their AT1 investments. But that doesn't seem likely any time soon.
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Until you look closely, stress testing sounds great. With the abject failures of the 2011 stress tests fresh in their minds (Dexia has been bailed out twice since passing the test with a 10% capital ratio), the European Banking Authority stress testing teams, and those of national regulators, will pull out all the stops to make the 2014 tests credible.
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The Securities and Exchange Commission has tried to cut the risk of runs in the money market fund industry by introducing liquidity fees and redemption gates. But as the Federal Reserve has just pointed out, by doing so it has done the opposite of what it intended, and made the funds more like banks.
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The US Federal Reserve told 11 banks last week that they had failed utterly to draft so called living wills — plans for how they would raise capital in a crisis and how they could be resolved in a hurry if they go under. It was right, they had failed. But the whole concept of living wills is shonky.
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The UK’s Financial Conduct Authority has decided that if you don’t understand what you are buying, you had better have a lot of money. This week the City watchdog banned the sale of contingent convertible bonds (CoCos) to retail investors for one year, arguing that issuing banks have an “unusually broad discretion” to halt the payment of coupons on the bonds.
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Russia is now subject to its toughest economic sanctions since the end of the Cold War. With the US and Europe effectively closed to them, Russian borrowers are searching for other options. Asia is top of their list, but they are unlikely to find the support they want.
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Borrowers of the world form a queue, Blog accidentally discovered the world’s greatest funding official this week.
