#capital ratios

8 11, 2023

FedFin on: Rebirth at 91

2023-11-08T16:55:16-05:00November 8th, 2023|The Vault|

Although FHFA calls its FHLB report a centenary event ahead of the System’s 2032 birthday, the agency clearly plans structural substantive reform well before that milestone.  Much of what’s planned will crimp FHLB profitability, increasing the importance of what would otherwise seem like tidying-up operational improvements to protect the viability of the System’s weaker Banks.  With its eye on keeping the System in line, FHFA does not even suggest it should be allowed by law or regulatory sleight-of-hand to issue MBS or …

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8 11, 2023

GSE-110823

2023-11-08T11:55:13-05:00November 8th, 2023|4- GSE Activity Report|

Rebirth at 91

Although FHFA calls its FHLB report a centenary event ahead of the System’s 2032 birthday, the agency clearly plans structural substantive reform well before that milestone.  Much of what’s planned will crimp FHLB profitability, increasing the importance of what would otherwise seem like tidying-up operational improvements to protect the viability of the System’s weaker Banks.  With its eye on keeping the System in line, FHFA does not even suggest it should be allowed by law or regulatory sleight-of-hand to issue MBS or like-kind instruments, get into the CRT business, or do anything much but provide ordinary advances to mission-focused members and up its own contributions to affordable housing.  A series of near-term regulations are also contemplated to ensure tighter mission compliance and more certain resilience, steps sure also to cut into the Banks’ already-challenged bottom lines.

GSE-110823.pdf

26 09, 2023

DAILY092623

2023-09-26T16:36:09-04:00September 26th, 2023|2- Daily Briefing|

BIS Analysis Blasts Lax Capital Regs, But We See Study Flaws

A new BIS paper uses confidential data to defend tough regulatory capital charges because bank internal measures of expected loss (EL) are “excessively optimistic.”  However, this critique in our view is applicable only to internal models.  It might be said that standardized-approach charges are also unduly optimistic if based on EL, but the entire Basel construct is intended to cover only EL, with loan-loss reserves, capital-conservation-buffers, the leverage ratio, and stress tests supposed to do the rest.

Basel Sees Large Bank Capital Improvements, Slight Liquidity Reductions

The Basel Committee today released the results of its monitoring exercise for the second half of 2022, finding that the largest banks’ capital ratios increased above pre-pandemic levels while liquidity coverage ratios declined.  Under the fully phased-in Basel III framework, the average common equity tier 1 capital ratio increased from 12.5% to 12.7% for Group 1 banks from the first half of 2022 to the end of the year.  Group 1 banks also reported regulatory capital shortfalls of $3.42 billion under this framework as of December 31, 2022, all of which was GSIB Tier II capital.

Daily092623.pdf

1 08, 2023

FedFin on: Capital Winners – GSEs – and Losers – MI

2023-08-04T09:44:41-04:00August 1st, 2023|The Vault|

We’ve much more to do to determine the strategic and policy impact of the new credit-, market-, and operational-risk capital rules singly and collectively – a complex task given the 1,089-page rulemaking made harder by some extremely-arcane language that may either mask what the agencies mean or differ from what they meant to mean.  Still, several conclusions about mortgage finance are clear:  the rules would be less demanding than those at present for many mid-LTV loans, the GSEs’ risk weighting continue to give them a considerable advantage over bank originators and securitizes, and MI lost the limited luster the banking agencies were forced to concede in 2013.

The full report is available to subscription clients. To find out how you can sign up for the service, click here.…

28 07, 2023

GSE-072823

2023-08-14T10:29:36-04:00July 28th, 2023|4- GSE Activity Report|

Capital Winners – GSEs – and Losers – MI

We’ve much more to do to determine the strategic and policy impact of the new credit-, market-, and operational-risk capital rules singly and collectively – a complex task given the 1,089-page rulemaking made harder by some extremely-arcane language that may either mask what the agencies mean or differ from what they meant to mean.  Still, several conclusions about mortgage finance are clear:  the rules would be less demanding than those at present for many mid-LTV loans, the GSEs’ risk weighting continue to give them a considerable advantage over bank originators and securitizes, and MI lost the limited luster the banking agencies were forced to concede in 2013.

GSE-072823.pdf

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