The largest European banking group (Finanzgruppe, group of savins banks in Germany) is a big fan of the Banking union and wants you to know it.

Their latest “state of the banking union” report is literally on fire. A thread
You enjoy resolution rules?

“Two early practical cases (Banca Popolare di Vicenza and Veneto Banca) sparked debate about conceptual deficiencies in the resolution mechanism”
Clearly, uniform resolution governance would improve the situation. Not so fast:

”Making the SRB responsible for all banks cannot be justified either economically or politically”
EDIS (European deposit guarantee) is crucial to the banking union.


“Above all, however, the fundamental goal of a centralised system – intergovernmental risk sharing and the perverse incentives it creates – deserves to be called into question.”
You think it’s time to setup a European FDIC?

You must be joking.

"By focusing exclusively on minimising cost, it disregards the potential adverse repercussions on customers, SMEs and regions.”
It’s time to get rid of the home-host problem and have full group supervision.

Are you mad?

“Such a change would ignore the lessons learned regarding the “too big to fail” problem […] & overlooks the risks of [...] a deterioration in the supply of financial services."
It's time to get rid of those NPLs in banks’ balance sheet! Surely we can agree on that!

What? Are you insane?

”It would be wrong to try to reduce risk by creating economic policy incentives for the sale of receivables”.
“Selling receivables does not really reduce risk – it simply moves it from the seller’s balance sheet to the buyer’s.”

And don’t try to stuff your EDIS on me once NPLs have gone down, I’m not that stupid!
"This shows that the forced reduction of NPL ratios alone is far from being a sufficient basis for risk sharing in the euro area”
Oh, and by the way, about those TARGET 2 balances, don’t @LorcanRK me please.

“Imbalances in the TARGET system are a clear indication of risk asymmetries in the euro area that are deeply rooted in the structural aspects of national banking markets”
In a nutshell, as their homepage says clearly:

“Again and again: The Banking Union is endangering stabilising structures as Savings Banks” !
Good luck resisting the strongest banking lobby in Europe 😉

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More from @jeuasommenulle

6 Apr
We finally have the total cost of the Archegos disaster for Credit Suisse: 4.4bn CHF.

There is one question I get A LOT: how is it possible that Credit Suisse took a multi-billion exposure on a “family office”?

I will try to explain - A thread.
First it should be stressed how extraordinary that exposure is.

One of the most important rules in banking (the one which puts Greensill in a *lot* of trouble) is called the large risk limit.

It says max exposure should be 25% of own funds.
In practice, most banks set internal limits around 10% - that would be approx. 5bn CHF.

How on earth did Credit Suisse get to a 4bn+ exposure?

The reason is probably that they didn't even know & I will try to explain why as simply as possible.
Read 37 tweets
31 Mar
We have the same kind of institution in France. Its effectiveness is not great. Pretty much every application is approved unless reckless. But there was an extraordinary story once... let me tell it to you
This is the kind of institution that will routinely allow members of the ministry of finance to go work for a bank.

But there was this normal guy who was working as a tax inspector. And he had enough of it, he wanted a life change. So he quit and said he wanted to become...
A travelling salesman selling umbrellas ! And believe it or not, the Commission de deontologie (the french equivalent) refused ! Why, will you ask? Surely there is no lobbying or conflict of interest involved !

Why can a treasury guy who authorised big M&A deals can go to a bank
Read 7 tweets
20 Mar
Je vois qu'il y a quelques questions donc je vous livre ma lecture éclairée du décret Absurdistan

1) on peut se promener avec sa famille mais pas faire du sport avec eux. Le premier que je vois courir avec son enfant c'est 135€. On marche !
2) on peut se promener dans un rayon de 10km ...mais si le chien est avec vous alors c'est max 1km.

3) on peut faire ses courses pro dans un rayon de 30km - mais attention, surtout ne pas prendre son chien.
4) Les vendeurs de graines et les luthiers sont bien en commerces essentiels - je vous sentais inquiet.

5) on peut se déplacer dans le cadre de l'acquisition ou la location d'un bien immobilier- mais seulement si c'est une résidence principale.
Read 5 tweets
14 Mar
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 (…) 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.…
Read 8 tweets
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
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

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