Banking

  • Private finance initiative seem like a good idea, at least short-term.

    Trading Short-Term Financing Gain for Long-Term Pain

    George Osborne is in the process of finding £20 billion of savings with his government spending review. As the government searches to balance the budget and reduce public spending, it is worth re-examining an old favourite when it comes to keeping spending off the balance sheet – private finance initiatives (PFI).

    This is a dangerously addictive way of financing public spending that rarely has an economical result. In fact, spending cuts put pressure on government departments who have to make fixed PFI payments to the private sector from their reducing budgets.

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  • Increased mortgage lending can improve financial stability if done correctly.

    Increased Mortgage Lending Not Necessarily a Precursor to a Bubble

    Domestic banking crises often originate in the real estate sector. Therefore, one might conclude that mortgage lending is negative for financial stability. However, in normal (non-crisis) periods, mortgage lending may actually contribute to financial stability. This is because mortgage loans have different risk properties from other bank assets such as commercial loans, so having some share of mortgage loans in a bank’s portfolio tends to diversify the risk of that portfolio.

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  • Dodd-Frank turns five, and many provisions still need implementation.

    The Three Rules of the Dodd-Frank Law

    Dodd-Frank turned five last month and once again, the debate around some of its rules sparked many discussions by politicians and economists, but less by the public. According to a poll conducted in 2015, only 4 percent were ‘very familiar’ and 30 percent were ‘somewhat familiar’ of the Dodd-Frank law.

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  • Measuring the depth and breadth of SNB's loss.

    The Franc(ness) of SNB's Problems

    Earlier today, the Swiss National Bank reported a record CHF50.1 bln loss. It has the chins wagging, but the real implications are minor.  The losses are not realized and are unlikely to be repeated.  In fact, if the SNB's report had covered the month of July, the loss would likely have been smaller. 

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  • The Fed orders G-SIBs to 'strengthen their capital position'.

    Are Globally Systemically Important Banks (G-SIBs) Still at Risk?

    Ever since the 2008 financial crisis, the Federal Reserve Board has been trying to regulate big banks that pose huge systemic risk to the economy. The financial crisis highlighted the fact that big banks were taking more risks for which they were not prepared.  Some banks were so big that if allowed to fail, they could have taken down the entire financial system with them.

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  • Financial inclusion of millions of under-banked Asians.

    How to Serve Millions of Potential Banking Customers in Asia

    Analyzing microfinance loans is one way to collect “alternative data” on consumer debt levels and ability to repay.

    Every time I stop and withdraw cash from an ATM or use my credit card to buy something online, I wonder how many people in Asia have access to such services. In fact, these simple transactions are beyond the reach of 45% of adults in East Asia and the Pacific alone. The formal financial system excludes them and it will remain so until they open a bank account.

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  • Remember how packaged asset-backed loans turned out last time?

    Is P2P Lending Becoming Banks Outsourcing Their Loan Process...and Risk?

    Peer-to-peer lending, the online platforms which allow you and I to lend directly to people and businesses who want to borrow, has been hailed as disruptive technology. Cheered by savers who have been stuck with rock-bottom interest rates, and by those who have sought finance from reluctant banks, the industry has grown exponentially since its birth in 2005. It has been seen as one in the eye for a financial sector at the heart of a crisis which has punished us all; which is why it might be off-putting to now see Goldman Sachs lurking with intent.

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  • The job-killing accounting change depends on who you ask.

    A Job-Killing Corporate Accounting Change?

    A modest change in an accounting rule is normally too much inside baseball to attract notice. But a proposal by the institutions that set accounting standards for publicly traded companies is prompting criticism from Congress and corporate America, backed by estimates that the change could kill millions of US jobs.

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  • Are banks still 'too big to fail' and will taxpayers always be the rescuers?

    The Federal Reserve Could Redefine 'Too Big to Fail'

    A month after America’s banks witnessed their largest quarterly revenue increase since 2009; Federal Reserve announced that it would increase capital requirements for eight of the largest banks across the country. Under the latest implementation of the Dodd-Frank financial reforms, the new risk-based capital surcharges would apply to systemically important U.S. banks that hold more than $50 billion in consolidated assets. In addition to J.P.

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