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The sell-off in European banks is terrifying and baffling, all at the same time. GlobalCapital would be first to admit there are still issues — poor growth, weak balance sheets, non-performing loans, defered tax assets, complex forms of untested capital cooked up in regulatory labs – but the continent’s biggest banks aren’t going anywhere. For one thing, they are still too big to fail.
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Europe’s banks, with a few notable exceptions, have yet to be hit hard with claims of unethical dealing. But that is likely to change. Thanks to a quirk of the European regulatory system, supervisors need to find some misselling before it is too late.
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BNP Paribas has impressive targets for cutting costs and increasing capital, after outshining some of its major competitors by posting a full year profit. But it needs to tell a compelling story about how it plans to hit them.
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It is no coincidence that Tuesday’s €1bn covered bond from BPCE attracted more investors for a French seven year deal than at any time in the last year. The European Central Bank has started to scale back its purchases.
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Capital market participants tend to keep their heads below the political parapet. Brexit is one issue they must not ignore. It would sabotage the City’s leadership in financial services and be an assault on the fabric of global governance.
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The European Commission's group of ‘experts’ are making welcome steps towards unraveling the complexities of bank capital. But the multiplicity of loss-absorbing instruments exists for a reason — not everything can become tier two capital.
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The first missed additional tier one (AT1) coupon payment may not be the harbinger of impending doom some think, but the implications for banks’ capital costs would be severe. -
The future looks bright for China’s domestic bond market having started the year in full throttle with Shanghai Pudong Development Bank (SPDB) and Industrial Bank raising a combined Rmb30bn ($4.6bn). But while the volumes may be impressive, making sure issuers honour the green label will be the real test.
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Italian non-performing loan securitizations will now come with a government guarantee, after months of negotiations between the state and the European Commission resulted in a rather rosy outcome for the country’s banks this week.
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Established covered bond investors are often sceptical about conditional pass through deals. The structure allows the maturity of their investments to be extended, perhaps by decades. But they could be safer than long dated bullet deals.
