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JohannesBorgen Profile picture
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14 Mar, 8 tweets, 3 min read
An optimistic Coronavirus thread, & not only about the corona you know!

There are 4 others widespread human coronaviruses (& 2 rare ones) and most of the time, they only give you a common cold.

Why is it important, if SARS-CoV-2 is different?

Meet OC43.
As I said, OC43 will only give you a cold. Sometimes it gives a bad respiratory infection, but it's rare, and no one really cares about OC43. But it hasn't always been like that!
Recent research (dr.dk/nyheder/viden/…) suggests OC43 was responsible for the "Russian flu" of 1890
In many ways, that pandemic was eerily similar to the Covid one - e.g. see this great story (sorry, in French). It killed more than 1 million people and spread like a wildfire.

vidal.fr/actualites/262…
A London pneumologist tells the story of coming one morning to his practice to find... 1000 new patients !

zora.uzh.ch/id/eprint/5735…
So how did we go from that deadly disease to a common cold? Immunity, of course. And this is the good news.

By looking at the way the 4 coronaviruses mutate and the immune system develops, Lavine & al. built a model to estimate the time needed to build the 3 immunities
(Infection, symptoms, transmission). They conclude that ( without any vaccine - the problem disapears in a few years (can be longer if variants develop)
BUT with a vaccine, this drops to less than a year.
There is hope.

Interestingly, a key assumption to the model is that young children do not develop a serious version of the disease. That would totally change the conclusions...

science.sciencemag.org/content/371/65…
So one day, your grandchildren will probably treat Sars-CoV-2 as a cold... and it will be weird !

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JohannesBorgen Profile picture
9 Mar
Look like I don't understand why you people don't invest in bank capital legacy bonds. It's very simple.
For example you get this discounted bond. It was Basel 2 tier 1 capital and has been grandfathered as CRR Additional Tier 1 capital. So the bank will keep it until 2021.
But post CRR1 grandfathering period in 2021 it will be eligible as Tier 2 capital so the bank might keep it longer.

However under the new CRR2 it might lack a waiver of set off rights which would eliminate it from Tier 2. But that would only be in 2025
Meanwhile, as a Tier 2 it would lead to infection risk because under article 56 CRR as a Tier 2 it cannot be pari passu to Additional Tier 1 - which it is because it was issued as a Tier 1.

However, since it was issued at an intermediate holdco level of a multiple point of entry
Read 9 tweets
JohannesBorgen Profile picture
19 Feb
Here it is !

A thread on Central Bank Digital Currencies (CBDC) because I think it’s both extremely important and poorly understood.

Simple questions I want to answer are

i)What’s the point?
ii)How do they work?
iii)Is there a risk for banks?

Sorry, it's a bit long.
First, the reasons for CBDC.

You can have a look at the mega thread I started a few weeks ago with @BCoeure stepping in. But it’s hard to digest, so let me summarize the rationale for CBDC (and my views).

I’ll mention official and non-official reasons.
Reason#1: costs.

Real cash (banknotes & coins) is expensive. Estimates vary from 0.2% to 0.7% of GDP, depending on the methodology, country, etc

But electronic payments are also expensive – and cards payments even more. Will CBDC be cheaper? I suspect it depends on country.
Read 60 tweets
JohannesBorgen Profile picture
19 Feb
A funny story & a cautionary tale on the shortcomings of the banking union.

Nordea is the biggest Swedish bank - which is not in the banking union.

At one point, they decided that they were not happy with Swedish supervision (too conservative) and they moved their HQ to Finland
Of course, they didn't say it, but they were hoping for substantial capital relief by using SSM rules instead of Riskbank rules.

But you see, the trick is that under the maze of EU rules, supervisors are in charge of Pillar 1 & Pillar capital requirements...
BUT not of macro-prudential capital requirements!

So the Finnish authority, not the SSM, is in charge of macro-ppu in Finland. Amusingly, they decided to apply to *Swedish mortgages* owned by *Finnish banks* the same risk weight as applied by the Swedish Riskbank!
Read 7 tweets
JohannesBorgen Profile picture
3 Feb
I wanted to wait for a few Spanish banks to report b4 sharing something intriguing. By now, you all know that the name of the game in EU banking is that there are simply no new NPLs because everything is deferred (government schemes, payment holidays). But is that always true?
And we all want to know what’s going to happen when reality kicks in. Interestingly, there’s one Spanish bank which apparently decided to stop pretending. If you take a casual look at it, you won’t see anything, because their NPL ratio hasn’t moved much - it's even going down
But that’ only because they did a big sale. The gross NPL entries are far more interesting - those are the real new default/NPL. And we can the first big jump since Covid.

That's a +125% rise over the past 6 quarters average.
Read 8 tweets
JohannesBorgen Profile picture
1 Feb
The ESRB & the @EBA_News published their macro scenario for the upcoming bank stress test. What does it look like? Will it finally be credible? And how important will the results be? A thread
Those are important questions, because investors have shrugged the results of the previous tests. Except for distressed banks (e.g. MPS), the results were almost useless – even the EU court of auditors heavily criticized the process.
One criticism often made is that the tests are not severe enough. The comparison with US/UK tests illustrates this (CET1 drawdowns). Of course, there can be good reasons for differences, and u can’t make a stress knowing the outcome you want…but it’s still dubious Image
Read 14 tweets
JohannesBorgen Profile picture
28 Jan
A thread on the German data on the efficiency of the AstraZeneca vaccine because I’m reading a lot of VERY bad takes. Is there any kind of statistical significance on the 6.9% efficiency? Is it total crap? It’s not that simple as I’ll try to show.
First of all, forget the absurd “Confidence interval” – it’s useless and based on assumptions that are almost by definition false. So let’s look at this problem differently.
The basic data is this 5829 ppl in the control group, 5807 in the vaccine group, of which 319 and 341 above 65. But the major problem is this: the control group had only case over 65 (101 in total). What is the implication of this surprising number?
Read 18 tweets

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