Banking developments

Some of the world’s biggest banks will soon have to hold even more capital, after global regulators banned them from relying on their own assessments of risk in running their businesses. [Link – from March 2016]. We do not know if the ‘soon’ has arrived already.

Three of the biggest US banks have been judged to pose greater systemic risks than last year and had their capital requirements increased by global regulators in their annual rankings of the most systemically important financial institutions. [Link]. Citigroup says that Federal Reserve rules require it to hold an even bigger systemic risk capital buffer.

Deutsche Bank’s supervisory board is taking legal advice on whether it can recoup bonuses from a number of former executives, including former chief executives Anshu Jain and Josef Ackermann. [Link]. But, it looks like Josef Ackermann is in no mood to oblige.

In 2014, the United States required foreign banks operating in the U.S. to set up an intermediate holding company that would ring-fence foreign capital in the U.S. That is, the idea was that losses incurred by U.S. operations would be covered by equity capital earmarked for the American operations. The headquarters located elsewhere will no longer have the option of cutting loose its American subsidiary. In other words, it is automatically bailed in. Now, the European Union is proposing to retaliate.

If adopted into EU law, the commission’s proposals would force US investment banks such as Goldman Sachs and JP Morgan to have additional capital and liquidity in the EU so their subsidiaries can better withstand a crisis and be separately wound up if needed by European authorities. [Link]

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