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The European Central Bank’s long term refinancing operation has been put to good use by the European banking sector. But its lack of discrimination raises dependency and, longer term, increases systemic risks.
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Moody's reckons the ECB's long term refinancing operation is credit negative for Europe's banks. It's hard to square this with the relief it is providing the sector, but the agency is right to warn of the dangers of relying on central bank funding.
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French courts threw out contractual rights when they ruled to protect the owners of the Coeur Défense tower from their creditors. But the answer to this isn’t self-righteous indignation. It’s to beware of any market that’s never seen a default.
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As banks look ahead to the second long term refinancing operation from the ECB next month, recycling that cash into high yielding sovereign paper seems like an obvious strategy. But that does not mean they should.
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ABS issuers could aim for lower ratings, dropping their fixation on hitting triple-A, Standard & Poor’s suggested last week. Now, thanks to other rating actions, the agency may have a point.
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Commonwealth Bank of Australia’s ground-breaking Aussie dollar covered bond deal is the story that everyone was waiting for. Its success disproves the conventional wisdom that euros and dollars are the only really liquid markets.
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The future of Royal Bank of Scotland’s ambition as a global investment bank will be decided in the coming weeks. Don’t write the firm off. RBS was not strong in the threatened business lines anyway. It remains a top player in debt. If it decides to make a go of it, RBS has a good chance of thriving as a debt-based investment bank.
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If the European Parliament is writing bail-outs into CRD IV, what happened to the last four years of political and regulatory debate?
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Defining liquid assets is always going to be a problem; the whole concept is flawed. The best regulators can do is use the Supreme Court’s standard on obscenity – “I know it when I see it”, in the words of Mr Justice Potter. Results otherwise are likely to prove perverse.
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As RBS takes the knife to its global banking and markets division, buying the equities platform would be an ideal way for one of the emerging forces in global investment banking to enter this business, writes David Rothnie. The problem is there are few candidates willing or able to take it on.