France is famous for wine, cheese, Versailles, football… and credit ratings.

Today I’m going to tell you how French banks will save billions of capital thanks to an old institution & a magic trick

Read till the end, it’s the wonderful story of a ruling worths tens of billions Let’s go back to Deutsche Banks’ recent disclosure that Basel 4 will cost them 15bn of capital (with 13% CET1r assumption).

See linked thread:

https://x.com/jeuasommenulle/status/1939699412873441323

Why is Deutsche stock hammered today?

An old theme is coming back to haunt them: Basel 4!

Quick thread. After almost 10y of discussion the package was finally enacted with full implementation in 2033.

Everyone felt, after many EBA reports & banks' disclosures, that impact would be mild.

But for first time banks are publishing capital ratios w/ the new rules and for DB it's ugly

Why is the latest EC proposal on securitization a big deal for banks and how does it change the SRT market?

A slightly geeky thread - with some backround on the SRT market if you're not aware of this important market. First what’s a SRT?

Following secular finance practice of reinventing the wheel but changing its name, the new trendy capital optimization transactions are “significant risk transfers”, but they’re just good old securitizations (invented in the 1860s 😊.)

(cash or synthetic)

Are you readyyyyy for LDI take 2?

Hear me out. Something’s brewing in the UK Gilt market.

#LettuceLiz As the chart above shows, the cash swap spread has moved significantly & one-way recently.

Spread to swap is now 50bps.

But EU & UK insurers book their liabilities at NPV using swap curves, not UKT curves.

Still with me ?

Bloomberg has some nice charts on the tariffs’ impacts.

The first one argues that tariffs on China are coming globally: too many countries will see a spike of imports from China & that's not sustainable. The second shows GDP impacts, taking into account direct effects + indirect via trade partners (using a WTO macro model, so, you know...)

SE Asia impact is massive, -1% for EU, -1.3% Japan and -2.5% Korea. Mexico bonanza.

A week ago the Swiss gvt bravely decided to leave the decision on UBS capital requirement to Parliament.

I’m not sure that was such a great idea – as the recent proposal of the Swiss Social-Democratic Party shows.

If implemented, it would be a massive game changer. A thread. First, a reminder: the SDP is not a fringe party, they’re #2 in the National council (41/200) & #3 in Council of States (9/46) & they’re also not particularly extreme (I mean, Swiss rarely are.)

But their proposals for UBS are a bit wild.

Let’s unpack.

Tomorrow is the end of the grace period for fentanyl-related tariffs (Canada Mexico), China ones r supposed to start on March 12. Time to look at some numbers. So far Trump has enacted 10% “fentanyl” tariffs on Chinese goods, enacted and cancelled 25% on Columbia and threatened : Canada, Mexico (25% goods + 10% Canadian energy), China (+10% addtl), 25% steel & aluminium worldwide, “fees” for Chinese ships/freight operators, “reciprocal tariffs” (whatever that means) for all nations + 25% autos pharma & lumber, + unknown % on copper.

You should watch the full unedited version of this unreal press conference All going as expected (Trump w/ his weird obsessions, Z trying to stay cool, Rubio wishing he was in bed) until it totally blows up bc Z can't help correcting Vance about diplomacy

The best summary of the twisted world we live in is how Trump ends the press conference:

"This is going to be great television"

You can't make it up

This is pure gold, Greek edition.
How did Eurobank achieve such an increase in capital ratios, in Q3 24? The trick is in the +99bps.
Which comes from a mysterious decrease of 2.4bn€ in RWA. But how? Deleveraging?
Oh no, that would be hard work. I’ve got a better idea.
Thread. It’s obviously the ICAP CRIF CQS, you idiot. Err, what?

BNP has very good notes on the US elections and how to trade them. They are mostly focused on timing and the info you should focus on. Here's my summary Before the elections

Apart from betting markets / polls, a source of info is mail-in ballot statistics.

Early voting doesn’t favor the Dems as much as 2020 (but Covid).

Maybe you’ve seen the crazy price action on Close Brothers last Friday or heard about the Hopcraft appeal court ruling and its impact for UK banks.

What is it about?

I’ll try to explain why it’s important but not Armageddon. This is all about getting financing when you buy a car, more precisely getting so-called “Point of sale” financing, i.e. the car dealer acts as broker for the actual bank or finance company providing the loan.

Italian press reports that Italian banks will contribute to 3-4bn€ to Italy’s budget… but this will cost nothing to banks.

How is this possible?

Who’s ready for some Italian black magic and a thread on the beautiful world of DTA? First some jargon busting: DTA means deferred tax asset, which is an accounting way to represent future lower payments on taxes.

If you think they’re just a technical detail, for some banks DTA represent more than 10% of their RWA – while their equity is 15-ish% of RWA!

Commercial real estate lending is one of the biggest risks to the banking sector (hello, NYCB ?) – so it’s crucial that banks have an accurate assessment of the value of the collateral they have. The ECB did an inspection on this recently, and the results are hilarious. Thread. For reference, the fair value of the collateral should be this

For those of you trying to make sense of that story, here’s a recap. It’s wild.

RBI is a large Austrian bank formerly making 50% of its profits in Russia. After Russia invaded Ukraine, what happens to this biz is obviously their key financial, strategic and political question

https://twitter.com/jeuasommenulle/status/1831764726583537720

Everyone in the “West” is pushing for a full exit but it’s not that easy because there’s also Russian law, RBI staff on the ground in Russia, clients, etc., no easy buyer to find and some argue selling for à like SG did is just handing out money to Putin’s cronies.

What's going to be the costs of the Crowdstrike outage for the insurance industry? Impossible to know precisely but Mediobanca has a nice breakdown explaining why it won't be massive.

There are 3 areas of losses:

- cancelled flights
- Business interruption
- Cyber policies

1/n Cancelled flights: reports are approx 5000 flights cancelled per day, still ongoing (backlog). That's big but 2010 Icelandic volcano had 100k cancelations ut MunRe explained the insured losses were low
munichre.com/en/company/med…

Thoughts about what's next in France + some important budget geekery in the middle. A long thread.

There is obviously no party capable of governing, But the two most important figures for me are approx

- RN + LFI = 214, 256 if we add EELV and PCF
- LR + PS + ENS = 131+162=293 In practice, this means that there is no “immediate” majority for votes of no confidence LFI + RN and that it will take the vote of one bit of the three “moderates” to pass one. The governement will not be that unstable.

There are also important rules to keep in mind:

Incredible story with finance and greed at its best. A thread.

Please consider that every tweet starts with "allegedly" because these people enjoy litigation, and I don’t want to get sued.

ft.com/content/60d454… It all started with the Morgan Stanley block trade (disgraceful) settlement with the DOJ, see below.

.

Buried in the docs, were the mentions of hedge funds on the other side of the trades that help Passi scam his clients.

https://x.com/jeuasommenulle/status/1747156420154290455

If you're following French politics, you'll probably hear about a weird theory soon, as it's likely to go mainstream: Macron could resign, call for new presidential elections and run again, effectively bypassing the 2-term limit.

Is it credible? I don't think so and here's why. The Constitution bans more than two consecutive terms.

Everyone pretty straightforwardly understands this as "Macron can't run again in 2027" (but could pull a Putin & come back in 2032.)

By now you've probably read 10 times that Macron called parliamentary elections to put RN/Le Pen in power & wait for them to mess up so much that Macron's heir will win in 2027.

I think that's a possible scenario but not his goal at all. It misses Macron's real target.

Thread.

https://twitter.com/ojblanchard1/status/1799904348379455981

Many reasons why it's probably not his goal.

1.- The main negative for Le Pen is that she (&her father) have always been seen as incapable of governing. They’re a protest party, nothing more. Break that taboo and you could actually help them.

The headlines that grabbed attention yesterday was this: "ECB to Impose First-Ever Fines on Banks for Climate Failures."

But the climate and bank headline that was actually important is a totally different one.

An (important?) thread.

https://twitter.com/Banqkys/status/1796063399824003379

An “ECB” working paper (so in theory just academic work, but, errr.) published 2 days ago discussed capital buffers for climate risks. T

he basic idea makes sense: an increased pace in energy transition is good for the climate but could hurt the credit profile of some companies.

Is another (what ?! not again!) Italian bank going to be bust?

The price action of BFF certainly doesn’t inspire much confidence.

What happened? Simple: the Bank of Italy did an inspection and suspended dividends (but not AT1 coupons.)

But why? Now, that’s a funny story. The bank’s called BFF – no, it’s not your teenager’s best friend, it’s the old Banca Farma Factoring.

They have a very odd business model: they buy commercial claims on public administrations.

Because PA are so late in payments, cash strapped SME go to BFF to get their money.