Crédit Mutuel 2010

<br /> Here is the expansion in monetary base: http://www.chartingstocks.net/wp-content/uploads/2009/03/money-supply.gif<br /> <br /> But money supply aside, I think all my points on your analysis of leverage are valid. Risk weightings are not a conspiracy, it does make some sense to apply different capital charges to banks which<br /> conduct different businesses and have different risk profiles. Now of course greek bonds should never have been risk-weighted to zero, and the whole methodology is a mess, whole floors of banks<br /> might be working to fudge their basel disclosures, but BIS ratios are not a conspiracy. Their are a mere attempt of regulators to provide a flexible capital regulation for banks which have<br /> different risk profiles. Of course capital ratios are too low, but Basel 3 will implement new risk-weighting on derivatives, introduce counterparty credit risk, credit valuation adjustments and a<br /> world of things you probably havn't read. So things are improving. But slowly as full implementation is 2018...<br /> Now of course everyone looks at leverage, stop making sensationalist articles about it. Regulators don't have a lot of legroom trust me, they do what they can. And the only 'reliable' global<br /> standard we have to assess credit risk and asset quality are for the moment rating agencies. And its not the best I agree. One day risk-weightings might be indexed on cds spreads who knows...Would<br /> it be better? I'm not sure.<br /> So leverage is of course a crucial indicator, but it needs to be assessed in correlation with other factors like liquidity,wholesale funding capacities and cost, asset quality, off-balance sheet<br /> liabilities and a whole world of things you can't imagine.<br /> Of course this interconnectedness risk and high leverage in our banking system is a huge threat. But comparing banks with this simple ratio is misleading and kindergarten risk analysis.<br /> Don't compare apple and oranges and try to be constructive instead of alarmist.<br /> Have a nice evening.<br /> <br /> <br />

<br /> La survalorisation des actifs est donc un exercice coutumier de toutes les banques internationales, pas étonnant que la confiance ne puisse tenir bien longtemps en cas de récession avérée pour les<br /> temps qui viennent.<br /> Il semble que de forts niveaux de levier soient la norme des GosBanks internationales, reste ensuite à "comprendre" comment et quelles ventilations sont possibles selon les normes locales afin<br /> d'avoir une comparaison objective.<br /> Un travail d'investigateur plus que chevronné dans une telle opacité, notamment le Shadow banking!<br /> Bref, grâce à tous ces banquiers, nous sommes dans la M.... pour un bon bout de temps!<br /> <br /> Très intéressant et éclairant commentaire de Buttonwood.<br /> <br /> Lien et blog également intéressants concernant la notion de risque:<br /> <br /> http://londonbanker.blogspot.com/2011/07/tissue-paper-over-mountain-range.html<br /> <br /> <br />

<br /> No, go and see my paper...Your poor answer reflects your poor judgment.<br /> You'll have to explain to the world where the 900bn of qe2 asset purchase scheme dissapeared then...The liquidity just vanished? Certainly not.<br /> If you're too lazy to read you can maybe watch this, its a beginner's explanation of qe dynamics. http://www.youtube.com/watch?v=HUGHk98c7wc&feature=related<br /> <br /> I tried to give you some clues to understand better what you see, do whatever you want with them. Now if you want to keep on believing you understand things better than regulators on the basis of a<br /> simple fraction...well you're certainly very french.<br /> <br /> <br />

<br /> C'est quand même mieux que les 4 plus grosses banques françaises, et cela va dans le bon sens.<br /> Pour info, la banque annonce un ration Tier One de 11,5% ; Standatd and Poor's l'a note A+ avec perspective stable.<br /> <br /> <br />

<br /> Dear Mr. Chevallier,<br /> <br /> Leverage is just more visible in the EU than in the US. But French Banks are not worse than their counterparts. In the US banking system, leverage has just moved from commercial banks to the shadow<br /> banking system and hedge funds (and on the fed’s balance sheet of course). Money supply has surged since QE. But total assets of US Banks hasn't increased. Don't you wonder where this liquidity has<br /> gone? That leverage hasn't disappeared, it was just moved in other financial vehicles. Which in turn invest this liquidity in markets.<br /> <br /> Transatlantic accounting standards disparities also account for part of the difference. Look into level 3 assets and Mark to model valuations of exotic derivatives in the US. Most European Banks<br /> have a majority of these assets on-balance sheet, which in part explains why their CAR is so low. According to audited financials, the largest bank in the world by assets is BNP Paribas. If you<br /> have worked in banking, you know this isn’t anywhere close to reality.<br /> <br /> Current Libor is also currently incredibly low making it possible for Banks to sustain their activities on very little capital bases. (<br /> http://www.wsjprimerate.us/libor/libor_rates_history-chart-graph.htm). The real problem facing our banking systems is not one of capital, it will be one of liquidity.<br /> <br /> But to come back to you point, in a perfect world everyone would hold a lot of equity. But you forget that high levels of equity make it difficult for banks to maintain high ROE, so they try to<br /> survive with a minimum of Equity. These conditions are clearly market induced, if you don’t maintain a high return on equity the market will punish your share price. Put your money in a mutualised<br /> bank if you want to avoid this mechanism. You also forget that most of these ‘gosbanks’ hold a large amount of highly liquid available for sale items that they could easily used to deleverage in<br /> case of panic or to cover potential losses. European banks are paying a high price for holding govies these days, but don’t forget they are (in most cases..) low-risk and highly liquid in<br /> comparison to other mkt assets. Certainly better than holding squared cdos.<br /> <br /> US Banks balance sheets look much worse than French ones. The originate to distribute doctrine in the US loaded their balance sheets with an unbelievable amount of crap. NPL’s will soon soar in the<br /> US. Which is why focusing the panic of the markets on the sovereign crisis is crucial for the US. But the macro-economic fundamentals of the eurozone have a much better outlook than US economic<br /> growth. And it is not because they maintain 10 percent TCE ratios that they are in great shape. Have a closer look and you’ll see a lot of skeletons in the cupboard.<br /> <br /> I read your blog as your candid way of looking at things remembers me of my point of view, when I looked at my first financials. After a while you realize there are a lot of other parameters to<br /> take into account than pure leverage. Interdependences and interconnectedness of our economies make these things possible…<br /> <br /> And things are unfortunately not always simple.<br /> <br /> Take some time to read this: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1916649<br /> <br /> <br />