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Between sleeping and waking, there is a middle phase: you realise it’s time to get up, but can’t quite bear to admit you need to get out of bed. London’s debt capital markets teams are in that zone. Brexit’s alarm has sounded, but few are eager to haul themselves into the cold air of Frankfurt or Paris.
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No bond issuer is safe in this volatile market. Industrial and Commercial Bank of China (ICBC) learned that the hard way when it was forced to pull a dual-tranche floating rate deal last week. Its failure should serve as a warning sign to other borrowers. -
EU supervisors should not need Andrea Enria, chair of the European Banking Authority, to tell them that full transparency on Pillar 2 is beneficial for the capital markets. It should have been clear all along.
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From June 2019 a large chunk of debt borrowed by banks from the EU periphery under the European Central Bank’s second Targeted Longer-Term Refinancing Operations (TLTRO II) will no longer be considered stable funding. Banks should refinance that debt in the market instead of hoping for another ECB handout.
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J Paul Getty once said that if you owe the bank $100, that’s your problem. But if you owe the bank $100m, that’s the bank’s problem. Italy’s battle with Europe and the response from the European Central Bank (ECB) suggest the same is true of eurozone membership.
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Too little capital, too much sketchy stuff on the balance sheet, too poor a set of earnings figures; maybe Germany should look closer to home before criticising other countries’ banking systems.
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Recent developments may help push the risk of cyber attacks onto the capital markets through catastrophe bonds and other insurance-linked securities (ILS). But investors are likely to be wary about taking on too much exposure.
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CYBG’s move to an internal ratings based (IRB) approach highlights how the UK’s largest lenders enjoy a substantial competitive benefit over the challengers.
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The Bank of England will steer banks and insurers to think seriously about climate change. This is great news in itself. But what will count is how far the Bank is willing to push them.
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Tucked away at the end of a press release, the Bank of England announced this week that it would delay a stress test for financial institutions. A messy departure from the EU could test the banks in real life instead.
