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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.

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

Banks can’t hide from the pain of underwater bond investments

29 November 2022Banks, Risk CommentaryAccounting, government bonds, interest rate risk, investments, mortgage-backed securitiesNick Dunbar

The biggest US banks amassed $2.2 trillion of government and mortgage bond investments, but now the portfolios are underwater and banks must hold them to avoid recording losses. This will have a lasting effect on deposits and the impact of Fed policy.

Regulators zero in on commodities

30 May 2022Bankscommodity risk, Federal Reserve, JP Morgan, nickelNick Dunbar

Bank exposures to commodities have reached record highs and in the wake of the nickel market turmoil in March, the Fed is warning about financial stability implications

Commodity bets return at large banks

1 July 2021Bankscommodity risk, ESG, green finance, regulationNick Dunbar

Carmakers and other industries need good risk management as they pivot toward climate-friendly products. This has prompted banks to return to taking outsized commodity bets, which in the past have caused trading losses and compliance disasters for many institutions.

A servant of two masters

17 June 2021Bankscentral banks, corporate bonds, leverage ratios, SLR, TLACNick Dunbar

Caught between a wall of QE cash and a web of capital rules, what is left for bank CEOs to do? The evidence from securities holdings, bond issuance and TLAC.

The $3 trillion hidden exposure behind the Archegos blowup

30 April 2021Banksequity financing, hedge funds, prime brokerage, repo lendingNick Dunbar

How the push for growth turned equity financing into a hotbed of regulatory arbitrage

Facing up to JP Morgan’s leverage relief threats

18 March 2021BanksBank of America, Covid-19, Federal Reserve, JP Morgan, leverage ratios, regulationNick Dunbar

The banking giant warned that it might slash its vast balance sheet if the Fed doesn’t roll over temporary leverage ratio relief. Could it unleash a wave of turmoil in wholesale markets if it doesn’t get what it wants?

How Covid forbearance gave banks a three trillion dollar boost

3 November 2020BanksBasel rules, CECL, Covid-19, Dodd-Frank Act, investment banking, tradingNick Dunbar

To keep banks operating smoothly during the pandemic, regulators eased capital requirements and boosted trading profits by underpinning financial markets. Did they go too far?

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