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At the same time, BNP Paribas said it had also significantly shored up the amount of capital regulators are requiring it and other financial institutions to hold in reserve against a worsening of the crisis.
"Banks are already worried about whether they can show that they are generating returns on equity that are sufficiently interesting for shareholders at the levels of reserved capital regulators are requiring of them.
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Gilles Gade, CEO of Cross River, told me that his bank is considered tier-one capital — regulator speak for "well-capitalized".
How can you pass the test and still need more capital?[Regulators] say this is a test that a bank simply will not fail: if the examiners determine that a bank needs "exceptional assistance," the government, that is, taxpayers, will provide it.I suppose the purpose of this exercise was to inspire confidence among investors and taxpayers and give banks the nudge/ability to sell their toxic assets.
Financial technology allows banks to operate with less capital than regulators think prudent.
The risk-averse market wants banks to hold a lot more capital than regulators require, and its will naturally prevails.
Of his $5 billion investment, only $2 billion counts in the important measure of capital that regulators look at, called Tier 1.
assistance was announced at a news conference this morning in Ankara, the capital, Turkish regulators seized Demirbank, the ninth-largest bank in Turkey.
In particular, transactions between an insured bank and an affiliated entity cannot exceed 10 to 20 percent of the bank's capital, unless regulators grant an exemption.
And some institutions, bankers allege, were parking illiquid structured products in their trading books to attract a lower capital charge (regulators now plan to beef these charges up).
At the Prudential Regulation Authority, which will focus on banks' governance and capital reserves, regulators will be expected to take a more aggressive stance on how firms price risk.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com