http://www.bloomberg.com/news/2012-11-01/deutsche-bank-jpmorgan-may-face-top-g-20-capital-charges.html
Submitted by Tyler Durden on 11/02/2012 14:11 -0400
Deutsche Bank Faces Top Surcharge as FSB Shuffles Tiers
By Jim Brunsden and Michael J. Moore - Nov 2, 2012 7:02 AM ET
Deutsche Bank AG (DBK) would be required to hold more capital and Bank of America Corp.’s burden stands to be reduced as global regulators shuffled the competitive balance among the world’s biggest banks.
Citigroup Inc. (C), HSBC Holdings Plc (HSBA) and JPMorgan Chase & Co. (JPM) join Deutsche Bank as firms that will be targeted for a capital surcharge of 2.5 percent, according to an updated list published yesterday by the Financial Stability Board. The change means Bank of America already exceeds requirements, while Deutsche Bank would be more than 2 percentage points below the new minimum of 9.5 percent.
“That limits earnings potential for Citigroup, JPMorgan and Deutsche Bank compared to Bank of America, all other things being equal, so it’s certainly a competitive advantage for them,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business.
The capital surcharges for systemic banks, set in half- percentage-point increments ranging from 1 percent to 2.5 percent, come on top of agreements by the Basel Committee on Banking Supervision to more than triple the core reserves they must hold against possible losses. The extra requirements are calculated against banks’ interconnectedness, size, complexity, global reach, and the ability of other firms to take over their functions if they fail.
RBS, Dexia
Royal Bank of Scotland Plc will be subject to a 1.5 percent buffer, down 1 percentage point from last year’s list. Three banks -- Dexia SA (DEXB), Lloyds Banking Group Plc (LLOY) and Commerzbank AG - - were removed from the list, the FSB said. Standard Chartered Plc (STAN) andBanco Bilbao Vizcaya Argentaria SA (BBVA), which weren’t included in 2011, were added to the lowest surcharge group.
Dexia is being broken up by the French and Belgian governments after losing access to unsecured funding. The other two have seen a “decline in their global systemic importance,” the FSB said. The quality of data it used in determining the list “improved considerably” from last year, the group said.
“It would have been more helpful if FSB explained why some banks fell off the list and why some joined or moved around buckets -- does this mean the framework was wrong last year?” said Barbara Matthews, managing director of BCM International Regulatory Analytics LLC, a Washington-based consulting firm. “This is a classic case of informational asymmetry between banks, regulators and markets that perpetuates moral hazard.”
Capital Levels
JPMorgan Chief Executive Officer Jamie Dimon last year predicted a “race to the top” as lenders tried to meet requirements well before the deadline and said his company would win business because of its higher capital levels.
Investment banks that aren’t in the top group will have to see if clients care whether they have as much capital as Citigroup and JPMorgan, said Christopher Wheeler, a London-based analyst at Mediobanca SpA.
“The guys at the top are stuck, and the guys below are scratching their heads and saying, ‘Do we have to go up and be in line to be competitive,’” Wheeler said. “If your clients don’t worry, you’re probably fine” to hold lower equity capital, he said.
Barclays Plc (BARC) and BNP Paribas SA (BNP) may face surcharges of 2 percent. BNP, based in Paris, and Edinburgh-based RBS were previously targeted for the highest 2.5 percent surcharges. Charlotte, North Carolina-based Bank of America, the second- largest U.S. lender, now faces capital requirements a full point lower than JPMorgan and Citigroup, the first- and third-biggest.
‘Head-Scratcher’
“Bank of America is a head-scratcher,” said Christopher Kotowski, an Oppenheimer & Co. analyst. “How you would come to the conclusion that Bank of America is less of a SIFI and less risky than JPMorgan and Citibank is just a real puzzler.”
Bank of America said last month that it had an estimated Basel III common equity ratio of 8.97 percent, above the 8.5 percent it would need with the surcharge in yesterday’s list. Still, U.S. regulators may be cautious in letting the lender return capital to shareholders in the form of dividends or buybacks, Kotowski said.
Deutsche Bank said earlier this week that it plans to have a Basel III ratio of 7.2 percent at the end of this year, below the 9.5 percent it would need with a 2.5 percent surcharge. The lender set a target of more than 10 percent by March 31, 2015.
“This ups the ante for Deutsche Bank,” Wheeler said. “They haven’t been in a great hurry to get where they probably need to be. We’ve been rattling on about how weak their capital is.”
Deutsche Bank
Then-CEO Josef Ackermann said last year he was proud that Germany’s biggest lender was considered the world’s most systemically important financial institution by Japanese regulators. Japan’s Financial Services Agency and central bank ranked Deutsche Bank the most important among 60 peers based on the impact their failure would have on the global financial system, the Mainichi newspaper reported in December 2010.
Some banks in the European Union already face requirements to hold core reserves equivalent to 9 percent of their risk- weighted assets, after sovereign-debt writedowns, under plans adopted by EU regulators in response to the bloc’s fiscal crisis.
9 Percent
The definition of what banks can count as capital to meet the international surcharges is stricter than that used by the EU, which allows lenders to use some contingent convertible instruments to meet the 9 percent threshold.
Standard Chartered already exceeds the capital levels it needs to meet the requirements, said Doris Fan, a Hong Kong- based spokeswoman for the bank. “Our inclusion in the list does not change the way we run the bank or think about our capital structure,” she said in an e-mail.
Large international lenders would have faced a 374.1 billion-euro shortfall ($483.8 billion) in the capital needed to meet the Basel capital rules had they been in force at the end of 2011, according to data published by the Basel committee in September. The figure factors in the surcharges for globally systemic banks.
Other changes included Mitsubishi UFJ Financial Group Inc. (8306), which moved from 1 percent to 1.5 percent, pushing its total requirement to 8.5 percent. Credit Agricole SA (ACA) moved down half a point to 1 percent.
“Our global scale and activities probably prompted the adjustment,” Yuji Okumura, a spokesman for Tokyo-based Mitsubishi UFJ, Japan’s biggest publicly traded bank, said by phone today. He said the lender already had an estimated Basel III common equity ratio of at least 9 percent as of June 30.
Japan Megabanks
Japanese Financial Services Minister Ikko Nakatsuka told reporters he’s not concerned that Mitsubishi UFJ’s proposed capital surcharge was raised. Sumitomo Mitsui Financial Group Inc. (8316) and Mizuho Financial Group Inc. (8411), the country’s other two so-called megabanks, remain on the list with targeted surcharges of 1 percent.
The capital buffers are scheduled to be phased in beginning Jan. 1, 2016, the FSB has said. The updated list was based on banks’ data at the end of 2011, the group said. The FSB said last year regulators would update the list annually, with each revision to be published in November. The 2014 version will be the first to be applied.
“A lot of work remains to be done on determining what risk weightings these banks will ultimately be subject to,” Richard Reid, research director for the International Centre for Financial Regulation in London, said in an e-mail. It’s also unclear how capital rules will “be applied in the coming years.”
Shrink Further
Regulators have said the list may shrink further as lenders take steps to reduce their systemic importance and ensure they can be wound down if they fail.
“There should come a day” when the list is blank, Stephen Cecchetti, head of the monetary and economic department at the Bank for International Settlements, said in an October speech. “That day will come when either the institutions change, the rules change, or both.”
The FSB published the updated list ahead of a meeting of Group of 20 finance ministers starting Nov. 4. The FSB brings together central bankers, regulators and government officials from G-20 nations to coordinate financial rule-making.
Others included on the list are Bank of New York Mellon Corp., Credit Suisse Group AG (CSGN), Goldman Sachs Group Inc., Morgan Stanley (MS), UBS AG (UBSN), Bank of China Ltd., Groupe BPCE, ING Groep NV (INGA), Nordea Bank AB (NDA), Banco Santander SA (SAN), Societe Generale SA (GLE), State Street Corp., Unicredit SpA (UCG), and Wells Fargo & Co.
“Citi’s estimated Tier 1 common ratio of 8.6 percent under Basel 3 at the end of the third quarter is among the highest in the industry,” said Shannon Bell, a spokeswoman forNew York- based Citigroup. “We expect to continue to generate capital through earnings and divestitures of non-core assets.”
Jerry Dubrowski, a Bank of America spokesman, JPMorgan’s Mark Kornblau and BNP’s Cesaltine Gregorio all declined to comment on the FSB report. Duncan King, a spokesman for Deutsche Bank, and Mary Guzman, a Credit Agricole spokeswoman in New York, didn’t immediately respond to e-mailed requests for comment, as did a spokesman for Lloyds.
and Dick Bove's roach motel warrants a mention just because Dick bove is just so........
http://www.zerohedge.com/news/2012-11-02/did-apples-slide-just-blow-dick-boves-employer
Did Apple's Slide Just Blow Up Dick Bove's Employer?
Submitted by Tyler Durden on 11/02/2012 12:00 -0400
Apple Bank of America Bank of America Dick Bove Rochdale
And it was shaping up to be a slow news days. From Bloomberg:
ROCHDALE SAID TO SEEK CAPITAL INJECTION AFTER TRADING ERROR
ROCHDALE EXECUTIVES SAID TO TIE CAPITAL SHORTAGE TO APPLE TRADE
ROCHDALE SECURITIES ANALYSTS INCLUDE DICK BOVE
By that logic, can one imagine the epic bailout Rochdale would need if Bank of America trades back to its rightful price well over 50% below current levels? Also, why is Rochdale trading on its own account? According to an unverified rumor, a Roch trader was supposed to be buying 125 shares every half hour, and instead bought 125,000. If correct, oops: that's a $74 million margin call.
Finally, the question of the day: How many more funds will claim they bought AAPL due to an "error" and now need a bailout?
* * *
And completely unrelated, here is Dick Bove's recommendation history on Bank of America while at Rochdale. Sadly, Bloomberg doesn't keep track of his recosat his previous employers. They were more of the same from the analyst who in March of 2008 said it was a "Once in a Generation Opportunity to Buy Bank Stocks.” A few weeks later the market was down about 40%.
anyone notice how difficult it has become for the PTBs to hold things together to Election Day ? Apple will hit 20 percent off its high when 564 gets hit ( Monday ? ) ...... wonder what that will do to market sentiment and those hedge funds holding Apple ?????
Spot Where AAPL Snaps 200 DMA, Sending Stocks Sliding
Moments ago AAPL broke the 200 DMA. Whether or not this was due to the earlier news from Rochdale getting caught with its pants down, and supposedly losing tons of money due to a rogue trader "buying" the stock as its proceeded to tumble from its all time highs less then 45 days ago (during which time it has lost more than 10 years worth of dividends in market cap), is unclear. What is quite clear, is the moment when the general market realized what had just happened. Sure enough, the jobs number came and want, and ES largely faded that move in under an hour. It remains to be seen if a technical indicator for the world's most widely held stock is more important to the general stock market than how many 60 year old workers the US economy added in October. Oh, and as for that whole iPad mini launch spectacle? Sorry. Time for the iPad Mini Magnum launch... or maybe even the maxiPad.
ES:
And now the question is: will the NY Fed step in, or will an early session of margin call override anything Kevin Henry et al can do, and let the selling finally commence, testing 1400 in ES one more time?
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