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In repaying the unidentified holders of $1bn of unguaranteed, senior unsecured Anglo Irish bank debt, the Irish government has betrayed its electorate. But it is the ECB that should take the greater blame.
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Hong Kong’s interbank market tracks its counterpart in the US, reflecting the peg of the local currency to the US dollar. But rising loans threaten a dislocation between Hibor and Libor rates — and banks should take a cautious approach to their lending for the rest of the year.
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With international banks caught in a capital conundrum, the smart money is moving to the denominator of capital ratios — risk weighted assets. To square the circle of pressure to lend, to recapitalise, and to derisk, banks are turning to techniques once dubbed “financial alchemy”. But we should think twice before dismissing this process.
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Throughout Alan Roch’s many years on RBS’s EM syndicate, he has become accustomed to jetting off to faraway exotic lands and fitting in with other cultures and ways of doing things. So he ought to have been well prepared for his recent move to become the bank's head of Asia Pacific syndicate.
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Piece by piece, liquidity or collateral swaps are starting to get the attention they deserve. The FSA, never backward in coming forward, has apparently blocked transactions already, following publication of new guidance on the subject earlier this year. Market participants report large and growing interest from parties on either side, and structures are rapidly evolving.
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First Sakrileg, now Sacrilegio. Covered bond purists have had an unsettling few weeks. The cry for structured covered bonds is not only getting louder but has moved across the covered bond bastion of Germany into Italy.
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US money market funds have retreated from eurozone bank debt, but financial institutions in the single currency have carried on funding regardless. With an already limited pool of borrowers, the funds may find they miss eurozone commercial paper more than the banks miss their dollars.
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The RMBS asset class is proving more effective at tapping US investor demand than European covered bonds. One reason is the gulf in collateral transparency. The latest ECBC initiative will not be enough to solve this.
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Europe’s leaders can restore confidence in the banking sector by offering to backstop the worst of feared losses. Across the board injections of equity capital would be the wrong way to do that. More creative solutions are needed.
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A rumoured second round of ECB bond purchasing has breathed life into what had been a dormant covered bond market — but don’t get too excited. Curiously, even with this week’s supply, September issuance is going to fall short of September 2008 when Lehman collapsed. That should tell you something.