The Fed’s Basel Endgame and the lazy supervisor problem

12 September 2023BanksBasel III, Federal Reserve, internal models, regulation, Silicon Valley BankNick Dunbar

The Federal Reserve is proposing to end its long flirtation with Basel internal models, and now is ousting the lead supervisor of Silicon Valley Bank. The actions are two sides of the same coin.

Equity financing risks glossed over by Credit Suisse fines

29 August 2023Banksequity derivatives, equity financing, hedge fundsNick Dunbar

At first glance, the $388m of fines imposed last month on Credit Suisse (via its new owner UBS) ought to draw a line under the Archegos scandal. But providing equity financing to hedge fund and family office clients is a lucrative business for large banks which involves systemic risk.

Charting China’s real estate bond meltdown

29 August 2023CreditChina, corporate bonds, distressed debt, real estateNick Dunbar

Our corporate bond tool shows that dollar-denominated Chinese real estate bonds are collectively worth just 12% of their total value two years ago. By analysing iBoxx departures and distressed prices, we firm up this analysis and look at the wider implications for China’s troubled economy.

The mountain range and the heat bath

14 July 2023Book ReviewsAI, artificial intelligenceNick Dunbar

Is there another book left to be written about AI? The second of a two-part series.

The last rites of BP’s pension fund

14 July 2023Articles, Pensionsinterest rates, pensions, taxationNick Dunbar

BP’s pension scheme was once a leading stakeholder in UK companies, but now it’s been ‘de-risked’ and may soon be hived off to an insurer. The story encapsulates the slow decline of Britain’s private sector defined benefit pension system.

Mechanical desires – some published and unpublished books on AI

30 June 2023Book ReviewsNick Dunbar

How do recent books help us understand the boom in artificial intelligence, and what is left to be written?

Conditioning and the Bank of England’s credibility problem

30 June 2023EconomicsBank of England, central banking, Federal Reserve, inflation, interest rate swapsNick Dunbar

The Bank of England uses forward rates derived from the swap market to forecast future base rates. This approach is flawed, and has contributed to the Bank’s loss of credibility in the fight against inflation.

Inflation and the return of corporate borrowing

8 June 2023Credithealthcare, inflation, utilitiesNick Dunbar

High interest rates were a dampener on corporate borrowing but now the trend has reversed, led by two sectors with their own inflationary characteristics

JP Morgan swallows First Republic Bank

5 May 2023Banks, Risk CommentaryAccounting, bank resolution, Federal Deposit Insurance Corporation, Federal Reserve, interest rates, JP MorganNick Dunbar

Six months ago we warned about held-to-maturity bond losses at US banks, but now the giants that hedged the risk are hoovering up depositors while unhedged regional banks are in crisis

How generative AI made Nvidia a giant of the S&P 500

5 May 2023Risk Commentary, TechnologyAI, artificial intelligence, equities, Google, Microsoft, Nvidia, OpenAI, semiconductorsNick Dunbar

11 years ago, Geoff Hinton and two grad students used a pair of GPU chips to win an image classification contest. Now these chips are powering the generative AI boom and have doubled Nvidia’s market cap.