The Banking and Strategy Initiative

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A whiff of profits far away? | Banking Insight

Liquidity Lounge

Liquidity Lounge (Photo credit: relux.)

 Liquidity regulation already hurts

Lobbying over the new Liquidity rules got hard as the banks enter an Observation period prior to counting of the LCR as standard for compliance. According to the FT report catching us up on it, that ratio is up to 81% for US Banks, 100% or 30 days of liabilities available in funds being the end target. However, European Banks that  started earlier on repairing their Liquidity situation in 2009 itself are still suspect on their backing down on Short term wholesale funding for which both inter bank and shadow banking funding channels have since been closed but remain as gap from the next day visibility of funds is hardly likely to be sought by banks outside the known banking system per se in terms of Cash, short term (<1 year) and Government Treasuries

As we mentioned in our review in April 2012 the Liquidity situation is already much better at the big 4 , JP Morgan and Goldman Sachs keeping $300 B and $160 B on their books for the LCR count. The longer term counterpart of the NSFR is however likely fully rid of the inter bank / shadow banking wholesale funding dependencies. However, everyone would want the Basel standards to ease up for their LCR requirements for Higher quality liquid sources ( Cash, Bonds and Treasuries) while the current deep blue number brought out in the analyses at near $750 B in gap  seems unlikely to be entertained by the regulators on both sides of the pond for such an exercise even for other banks as the tentative recovery now has post crisis regulatory impact data available that speaks to the direct impact of the new regulations on the banks and the Economic core in Europe if not the US

Higher Capital Ratios and appropriate Liquidity Ratios for shorter and longer term ALM are much simpler for regulators in Asia as India in particular avoids much of the non collateral / non quality exposure that brings about the crisis to its head three years after primary regulation was put in place and the keeling ship straightened.

 Deutsche Bank gets down to post crisis cleaning

Deutsche Bank was one of more European Banks shutting down on late action on Non Performing portfolios (NPLs and writedowns) having crashed thru 2010 and 2011 over the deleveraging and losses from PIIGs holdings ( in its Postbank portfolio) Last week’;s ne winvestigations from the SEC had caught up with the bank on its valuation practices for the super senior portfolios ( read illiquid trades) In a detail previously missed, Deutsche had settled out of court with the employee/complainant Matt Simpson for $900k while SEC counsel Kuizami has been a Deutsche Bank employee and the SEC counsel employed with Deutsche Bank since 2001.

The bump in Larger non US equities portfolios may be around the corner

While the achievement of a more than 2.5% GDP growth rate in 2012 overall may already ensure that US equities will tick to the green more than the red, Asian equity portfolios weighted on China and even Japan may be in for the long awaited big plays in 2013 and bring much need relief to Intternational Equity Trading volumes building back to a better bank situation in H@ even on US trading desks as Europe also comes out of its shadows and Japan builds onthe good news from the finally falling Yen, giving it a longer lease on the growth paradignm and building blocks for the ramp up from china trade and the rise in Global Trade

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