EU stress tests show banks more robust against a crisis

Germany — Europe-wide stress tests show that big banks would come through a theoretical financial crisis in better shape than in the last such test two years ago.

But several analysts said the test didn’t mean Europe could sound the all-clear about potential trouble from Italian banks and government finances.

None of the 48 tested banks, covering about 70 percent of the EU banking sector by assets, fell short of a capital yardstick used in earlier exercises, although this year’s exercise does not give pass-fail grades. That bar was easily cleared by all four Italian banks and by Deutsche Bank, which is trying to return to profit after three years of losses.

Italian banks are in focus because of their large holdings of government bonds, which lost value due to fears that Italy’s new populist government will run bigger deficits.

The results showed that, on average, banks across Europe were left with capital padding of 10.3 percent of their assets, measured as their common equity tier one ratio. That is a widely used measure of bank financial strength and ability to cope with losses on investments and loans that don’t get repaid.

This year’s average strength compared to 9.4 percent in the 2016 stress test of 51 banks under a different scenario.

This year’s scenario, run by the European Central Bank, the European Banking Authority and national supervisors, involved a bigger shortfall in economic output than last time in 2016. Banks faced a 2.7 percent fall in economic output over three years, plus a ferocious bear market in stocks and steep declines in house prices. The scenario attempts to capture some of the known risks to the European economy, including those associated with Britain leaving the European Union and a big drop in sky-high home prices in Sweden.

The stress tests are part of a broader effort to strengthen banking regulation and the banking system in the European Union in the wake of the Great Recession global financial crisis a decade ago, and the eurozone debt crisis that peaked in 2011-2012. Bad banks played a role in the eurozone debt crisis in Ireland, which was forced to seek a bailout from other eurozone governments after guaranteeing the liabilities of failing banks.

Although the results are not pass-fail, all the banks exceeded a 5.5 percent capital yardstick used in an earlier test. The results of the test will now be digested by the European Central Bank’s banking supervisory arm. That process could result in weaker banks being asked to raise money or take other steps to improve their finances.

Several analysts said the test did not fully capture the risks to Italian banks from potential falls in the value of Italian government bonds. A dispute between Italy’s government, which wants to spend more, and the European Commission, which wants to enforce rules against excessive debt and deficits, has emerged as a potential new crisis for the 19-nation eurozone.

Analysts at credit-rating agency DBRS said the scenarios for falls in the prices of Italian bonds were “relatively soft” compared to the plunges seen in the 2011-2012 crisis for Greece, Ireland and Portugal.

Jack Allen, senior European economist at Capital Economics, said that “these stress tests shouldn’t be taken as a sign that the country’s lenders could with stand a crisis sparked by doubts about debt default and/or currency redenomination,” which would happen if Italy were to leave the shared euro currency union.

The Italian banks and their strength ratios under the stress scenario were: UniCredit, 9.3 percent, Intesa Sanpaolo, 10.4 percent, Banco BPM, 8.5 percent, and Unione di Banche Italiane, 8.3 percent. The Italian Central Bank said their average loss of 3.9 points was in line with the test average.

Deutsche Bank saw its capital buffer fall to 8.1 percent. Chief Financial Officer James von Moltke said in a statement that the result showed that “our risk profile is strong, but our profitability is not. This is exactly where our focus is now.” Deutsche Bank says it aims to turn a profit this after slashing expenses and risky investments after three straight years of annual losses.

Copyright 2018 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

[“source=forbes]

Women in Cleveland banking speak on culture, from ‘Mad Men’ to #MeToo

KeyBank is the biggest bank in Cleveland. Women in Cleveland's banking community speak about the culture, past and present.

In 1972, Linda R. was a summer intern at National City Bank. A year away from receiving her applied science degree from Miami University, she was part of the wave of women who transformed the American workforce within the next 15 years, from 38 to 47 percent female.

Her technical education set her apart — at the time, 80 percent of female workers were secretaries, bookkeepers, or elementary school teachers. That summer, Linda joined a mostly-male project team; all her supervisors were male.

One morning she went into the team meeting room, and there, on the wall, was a picture of a scantily clad woman with whom she shared a passing resemblance. The woman’s face was circled in black magic marker; “Another first for Linda!” was written, in her supervisor’s handwriting.

By the mid-90s, everything had changed, says Meredith S., who began her career in 1978 as a clerk/typist at Society Bank (now Key Bank). The overt sexism had gone the way of other ’70s artifacts: the leisurely lunches, the Christmas parties at the Sheraton, the Union Club’s back-door entrance for women.

But that doesn’t mean women and men are treated equally in the world of banking.

Interviews with women in Cleveland banks and financial offices make it clear that the banking culture today is still overwhelmingly male-driven.

Key Bank CEO Beth Mooney – often named as one of the most powerful people in the Cleveland business world — is among the 12 percent of female bank CEOs nationwide.

Here are a few of their stories:

Meredith

At the start of her career, Meredith — who received her bachelor’s degree and Master’s of Business Administration, and ultimately advanced to the position of a bank vice president — remembers a workplace more “Mad Men” than #MeToo. Mid to upper management was almost exclusively male, and protections of Human Resource departments had yet to be established. She recalls mid-level managers openly rating the attractiveness of secretaries’ legs; off-color and suggestive birthday cards from bosses to subordinates; and open ruminations about a divorced woman’s sexual life.

The change may have been due to a heightened awareness, or the influx of more women in the workplace, but Supreme Court decisions and legislative settlements didn’t hurt. In 1986, the Supreme Court case Meritor Savings Bank v. Vincent established that it only took an abusive work environment to prove sexual discrimination, and, seven year later, it was decided in Harris v. Forklift that harassment could be proven without any physical or psychological injury. Large settlements followed, with $

34 million awarded to female workers at Mitsubishi Motor, and $150 million at Smith Barney.

The weakening of the economy, which resulted in bank mergers and downsizing, and the increasing use of technology, which enabled analytical tracking of employee performance and production, added to a cleansing and depersonalization. In today’s work environment, production numbers loom supreme; lunches are eaten in cubicles; and business is more like … business.

“Today,” says Meredith, now an independent consultant for financial services, “people are very wary of office conversations that even touch on the personal.”

Courtney

A 2016 Harvard Business Review article noted, “although overt sexism in financial firms has been stamped out, unconscious bias and gender expectations have not.”

The quote refers to the seeming inability of women to reach banking’s highest executive levels. Only slightly more than a quarter of banks have women in the top five executive positions. A LeanIn/McKinsey & Co.  survey indicated that men were still 15 percent more likely to be promoted — and that percentage rises with job level.

In a March issue of American BankerJulieann Thurlow, president and CEO of Reading Cooperative Bank commented, “When you look into these crowds of bankers, everyone does look alike.” The result, she states, is a reluctance of women to speak out when they do not see themselves reflected in the power dynamic.

Management matters.

Courtney K., an officer at Key Bank. Having worked at several Cleveland banks over the course of her career, said she feels a different confidence with her current employer of KeyBank, led by Beth Mooney.

“If someone calls me sweetie or honey, I may not like it, but I can deal with it,” she said. “I don’t know. I just feel there’s an equal playing field here. I guess it might start at the top.

Sara

Sara, a Cleveland bank loan officer/underwriter who started her career in the early 2000s, says this: “I’ll just leave it here — every underwriter I work with is female; every manager, male.”

She also gives a present-day example of a male manager whose comments to a female officer in a subordinate position could be taken straight from the ’70s playbook — except now they’re confined to the privacy of his office.

From “Clean up the kitchen before you go,” to his relaying particulars of a dream in which she played an uncomfortable part, it begs the question … Why doesn’t the woman go to Human Resources?

With that, Sara expresses a wariness, shared by each of the women interviewed, of handing off “problems” to HR.

As the #MeToo movement empowers/encourages women to speak up, the risk is always tempered by personal economics. Today, 40 percent of working women provide the sole economic support for children under the age of 18 — and married women contribute a critical half to most family incomes. Battles are chosen carefully.

“Women can’t take the risk it won’t backfire,” she explains. “It’s just safer to suffer in silence.”

Meredith S. puts it more bluntly. “Who pays HR salaries?” she asks. “Management. So, who do you think they’ll believe?”

[“source=forbes]

US unleashes sanctions on Iran, hitting oil, banking and shipping

Protestors

The Trump administration reinstated all sanctions removed under the 2015 nuclear deal, targeting both Iran and states that trade with it.

They will hit oil exports, shipping and banks – all core parts of the economy.

Thousands of Iranians chanting “Death to America” rallied on Sunday, rejecting calls for talks.

Iranian President Hassan Rouhani has vowed to sell oil and break the sanctions.

The military was also quoted as saying it would hold air defence drills on Monday and Tuesday to prove the country’s capabilities..

[“source=forbes]

Non-Banking Housing Finance Lenders Under Liquidity Stress: Top Official

Non-Banking Housing Finance Lenders Under Liquidity Stress: Top Official

A top government official on Monday said the nation’s non-banking housing finance companies were facing liquidity stress, in comments that are likely to put more pressure on the central bank to ease its policy towards the sector.

The intervention by Corporate Affairs Secretary Injeti Srinivas came after Finance Minister Arun Jaitley and other government officials raised the issue of a liquidity crunch at a meeting with Reserve Bank of India’s (RBI) Governor Urjit Patel and other regulators last week.

The government has asked the RBI for a dedicated liquidity window for these lenders similar to the one allowed for the entire financial sector during the 2008-2009 global financial crisis.

But so far, the central bank has not agreed to the request, as it fears that such an accommodation to those who haven’t been prudent with their lending will only encourage reckless behaviour.

Currently, the shadow banking sector comprising around 11,400 firms with a combined balance-sheet worth over Rs. 22 lakh crore ($301.26 billion) face central bank’s restrictions on borrowings from banks, keeping provisions for the safety of depositors.

The government and the RBI are currently at loggerheads over a series of issues, including control of its reserves, its power over the payments system, and monetary policy.

“The segment of housing finance within the NBFC (Non banking finance companies) sector is facing stress of liquidity,” Srinivas told reporters on Monday, adding the government was trying to address the issue.

The sector needs to reassess how it operates, he said noting there was a need to adopt a sustainable model which could minimize the mismatch between their borrowing and lending. A string of defaults at one major NBFC, Infrastructure Leasing and Financial Service Ltd (IL&FS), have triggered sharp falls in stock and debt markets in recent weeks amid fears of contagion within the rest of the country’s financial sector.

Srinivas’ comments triggered falls in housing finance lenders Indiabulls Housing Finance, Dewan Housing Finance Corporation and PNB Housing Finance which were all down between 3 per cent and 8 per cent on Monday.

Srinivas declined to comment when specifically asked about these companies.

Securities analysts and economists said while the central bank was looking for an improvement in governance of lenders through various restrictions, the government was working on a piece meal approach to address short term liquidity needs.

“There seems to be a difference of opinion between the RBI and the government about the solution strategy,” said NR Bhanumurthy, an economist at the National Institute of Public Finance and Policy, a Delhi-based think-tank.

[“source=forbes]

India govt says some shadow lenders face liquidity stress, puts pressure on RBI to ease

A top Indian government official on Monday said the nation’s non-banking housing finance companies were facing liquidity stress, in comments that are likely to put more pressure on the Indian central bank to ease its policy towards the sector.

FILE PHOTO: People walk past a building of IL&FS (Infrastructure Leasing and Financial Services Ltd.) outside its headquarters in Mumbai, India, September 25, 2018. REUTERS/Francis Mascarenhas/File Photo

The intervention by Corporate Affairs Secretary Injeti Srinivas came after Finance Minister Arun Jaitley and other government officials raised the issue of a liquidity crunch at a meeting with Reserve Bank of India’s (RBI) Governor Urjit Patel and other regulators last week. The government has asked the RBI for a dedicated liquidity window for these lenders similar to one allowed for the entire Indian financial sector during the 2008-2009 global financial crisis.

But so far, the central bank has not agreed to the request, as it fears that such an accommodation to those who haven’t been prudent with their lending will only encourage reckless behavior.

Currently, the shadow banking sector comprising around 11,400 firms with a combined balance-sheet worth over 22 trillion rupees ($301.26 billion) face central bank’s restrictions on borrowings from banks, keeping provisions for the safety of depositors. The government and the RBI are currently at loggerheads over a series of issues, including control of its reserves, its power over the payments system, and monetary policy.

“The segment of housing finance within the NBFC (Non banking finance companies) sector is facing stress of liquidity,” Srinivas told reporters on Monday, adding the government was trying to address the issue.

The sector needs to reassess how it operates, he said noting there was a need to adopt a sustainable model which could minimize the mismatch between their borrowing and lending.

A string of defaults at one major NBFC, Infrastructure Leasing and Financial Service Ltd (IL&FS), have triggered sharp falls in Indian stock and debt markets in recent weeks amid fears of contagion within the rest of the country’s financial sector. Srinivas’ comments triggered falls in housing finance lenders Indiabulls Housing Finance (INBF.NS), Dewan Housing Finance Corporation (DWNH.NS) and PNB Housing Finance (PNBH.NS), which were all down between 3 percent and 8 percent on Monday.

rinivas declined to comment when specifically asked about these companies.

Securities analysts and economists said while the central bank was looking for an improvement in governance of lenders through various restrictions, the government was working on a piece meal approach to address short term liquidity needs. “There seems to be a difference of opinion between the RBI and the government about the solution strategy,” said N.R. Bhanumurthy, an economist at the National Institute of Public Finance and Policy, a Delhi-based think-tank.

[“source=forbes]