Market cynicism greets European Union bank stress test results

“There is so much scepticism in the market with respect to the outcome,”
wrote Mr Peters.

The methodology for the stress test was reasonably simple. Banks‘ performance
was modelled against three theoretical scenarios.

Firstly the benchmark case, which looked at a bank‘s financial strength over
the next two years assuming current growth trends were maintained.

This was followed by two “adverse scenarios”, the first involving
two years of worsening economic conditions, and the second based on a “sovereign
shock” whereby European government bond values would fall to rock
bottom levels.

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Reforms to cost European banks £208bn in lost profit

By Philip Aldrick and Edmund Conway

Published: 11:40PM BST 14 May 2010

The calculation, the first to assess the combined effect of proposed changes
to capital, liquidity, funding and tax rules, comes just days after Michael
Geoghegan, HSBC chief executive, warned that early implementation of
the controls could trigger a second credit crunch and tip the global economy
back into recession.

The research also coincided with a promise by the new business secretary,
Vince Cable, that “there is going to be a restructuring” of the banks. In
hard-hitting remarks, he insisted the coalition Government’s inquiry into
breaking up the banks would result in major changes.

“We can’t close down the possibility that unilateral action might have to be
taken,” he told the Financial
Times. “The banking sector is going to have to accept disciplines on
the way it operates.”

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Skipton Building Society sells credit checking arm Callcredit

Published: 12:15PM GMT 08 Dec 2009

Although Skipton – the country’s fifth-largest society – did not disclose the
sum paid, it said: “The deal generates around £40m of additional
profit, boosting the society’s capital base.” The disposal lifts its
core tier one capital ratio from 7.19pc to 8.7pc.

Callcredit is the UK’s third-largest credit checking business after Experian
and Equifax. The management, led by chief executive John McAndrew, owns a
small stake and will remain at the helm. Skipton founded Callcredit, which
has an annual turnover of around £50m and last year recorded a £5m profit,
in 2000.

The society retains a number of other unusual building society interests,
including the 460-branch estate agent Connells, five independent financial
advisers and mortgage servicing business Homeloan Management.

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Yorkshire merger with Chelsea to lead to job losses, no windfall

Published: 10:59AM GMT 02 Dec 2009

The societies
said in a statement on Wednesday said they planned to create a
society with assets of £35bn that would provide “a competitive and secure
alternative to the retail banks“.

However, they said the tie-up would lead to job losses among the 3,200 staff
at the combined group, which will have 2.7m members and 178 branches.

The new society will be called Yorkshire Building Society, with Chelsea’s name
retained as a separate brand.

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Yorkshire warns of job losses in Chelsea deal

The boards of Yorkshire Building Society and Chelsea Building Society agreed
today to merge in a deal that will see jobs losses and a £200 million
writedown on Chelsea’s bad debts.

The deal will not generate a windfall for members, and Yorkshire said that it
would have to take a writedown of at least £200 million, after the
completion of the takeover on April 1, to provide for future losses from
Chelsea’s existing loans.

The writedown and the merger with Chelsea will cut its core Tier 1 capital
ratio — a key measure of its financial strength — from 12.3 per cent now to
10.2 per cent.

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Yorkshire warns of job losses in Chelsea deal

The boards of Yorkshire Building Society and Chelsea Building Society agreed
today to merge in a deal that will see jobs losses and a £200 million
writedown on Chelsea’s bad debts.

The deal will not generate a windfall for members, and Yorkshire said that it
would have to take a writedown of at least £200 million, after the
completion of the takeover on April 1, to provide for future losses from
Chelsea’s existing loans.

The writedown and the merger with Chelsea will cut its core Tier 1 capital
ratio — a key measure of its financial strength — from 12.3 per cent now to
10.2 per cent.

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Independence ‘would cost banks billions’ says OECD

By Edmund Conway

Published: 8:07PM GMT 22 Nov 2009

Calculations from the Organisation for Economic Co-operation & Development
(OECD) have uncovered the full scale of the reliance of too-big-to-fail
banks on taxpayers. To become true stand-alone institutions, they would have
to raise their core capital ratios above 20pc. Britain’s banks are currently
operating with ratios of 8pc-10pc, a level considered by regulators to be
conservative.

To lift its core capital ratio above 20pc, a bank the size of Barclays would
have to raise £40bn – more than its current market capitalisation of £34bn.

The OECD’s analysis is the first quantitative dissection of precisely how much
it would cost for the world’s biggest banks to insure themselves rather than
rely on state support. Its findings on what it would take to make big banks
truly independent suggest an equity injection on a scale way beyond that
which regulators are currently contemplating.

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Bank of England starts debate on lending surcharges

By Angela Monaghan

Published: 12:01AM GMT 21 Nov 2009

In a discussion paper the Bank said these “capital surcharges” would
be a new macroprudential tool designed to restrain excessive risk-taking
during boom times, and would be a form of self-insurance for the banks. The
idea is that charges could prompt banks to conserve capital by slowing
lending during the good times.

The surcharges would be on top of capital ratio requirements, and would be
increased during credit booms, and decreased during downturns. One option
would be to apply a higher charge to those classes of lending deemed the
most risky.

“Increasing capital requirements in a credit boom would generate greater
systemic self-insurance for the system as a whole and, at the margin, act as
a restraint on overly exuberant lending,” the Bank said in the
discussion paper.

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HSBC ’significantly ahead’ as US bad debts slow

HSBC said today that its third quarter operating profit was “significantly
ahead” of the same period last year, helped by the first fall in bad
loan write-offs from its American consumer finance arm since the start of
2006.

The global bank, which has a strong presence in Hong Kong and Asia, said that
it had seen strong growth from investment banking.

Michael Geoghegan, the chief executive of HSBC, said that although operating
profits would be ahead of the trading period between July and September last
year, a one-off charge for the falling market value of its own bonds would
drive third quarter profits below 2008.

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EU competition commission foists draconian remedies on RBS

By Philip Aldrick, Banking Editor

Published: 8:50PM GMT 30 Oct 2009

Royal Bank Of Scotland Group



Lloyds Banking Group

Stephen Hester, RBS chief executive, has been battling the proposals in Europe
this week, which run counter to his plans to rebuild the bank. He has
earmarked eight “core” businesses that will drive RBS back to
profit over the coming years, including the insurance operations of
Churchill, Direct Line and Green Flag, and those investment banking business
under threat.

Neelie Kroes, European Union competition commissioner, is insisting on the
disposals in return for £20bn of taxpayer support and participation in the
asset protection scheme (APS), a giant insurance policy for its toxic debts.

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