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REUTERS JPMorgan and Citi May Face Extra Capital Requirement | On the preliminary list of banks that could be required to raise an additional 2.5 percentage points of capital under international rules are Citigroup, JPMorgan Chase, BNP Paribas, Royal Bank of Scotland and HSBC, Bloomberg News reports.
The bank said it planned to pay out 30.0% of earnings to shareholders in 2009, which would generate an additional 80 basis points of capital.
Fannie-Freddie are even worse; the participants claimed that they had a 95-to-1 leverage at one point (just 18 basis points of capital), a monstrously risky number for any firm, much less a large one.
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Keynes was always sceptical of what he called the fetish of liquidity, arguing that the point of capital markets was to channel savings into productive investment rather than create casinos.
Such banks might be need as much as 2.5 percentage points of additional capital, bringing the total to 9.5 percent.
But the Bank of England is proposing that banks should only have to hold the full extra 3 percentage points of equity capital if their assets are larger than 40 per cent of GDP.
The weak points of social capital theory in general, and applied to migration research in particular, are twofold.
SIFIs would be required to hold up to 2.5 percentage points of extra capital as a proportion of their risk-weighted assets, for a total buffer of 9.5percentt.
However, as Mr Roe points out, ownership of capital is often extremely diffuse, spread over many thousands of shareholders.
These deviations might be driven by a notable endogeneity between capital structure and the decision to hedge, as corporate hedging might also be seen as the starting point of the capital structure decision (Bartram et al. 2009; Lin and Smith 2007; Lin et al. 2008).
The whole point of increasing capital ratios is to restore market confidence in European banks.
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