How banks are talking about Basel III and liquidity

A review of recent bank presentations at financial conferences shows as positive a spin as possible on changes due to Basel III, Dodd-Frank, EMIR and similar regulations. Highlights of each bank’s presentations are below.

Morgan Stanley: Tier 1 Common Equity (Basel III): ~9%
– Restructuring businesses that are capital punitive under Basel III
– The Firm has reorganized businesses to reduce sources of risk
– Less liquid assets are down meaningfully
· · Derivatives represented ~5% of total assets as of 1Q12, down from ~15% at the end of 2008
– U.S. Government and Agencies represented ~8% of total assets as of 1Q12, up from ~3% at the end of 2008

Bank of America:
– Reduced VaR (on a quarterly average basis) from $184MM in 1Q11 to $84MM in 1Q12
– Tier 1 common equity and liquidity are at record levels ‒ Tier 1 common equity of $131.6B and Tier 1 common ratio (Basel I) at 10.78% ‒ Global Excess Liquidity Sources at $406B

– Basel III Tier 1 common ratio of 7.2%(2), expect to exceed 8% by year end
– Ample liquidity – $421B aggregate liquidity resources, Basel III LCR
estimated to be in excess of >125%, comfortably above proposed requirement

Goldman Sachs::
– Hypothetical leverage cap of 20% results in ROE reduction of only 233 bps
– 18x leverage shows ROE reduction of 348 bps

– Estimated Basel III Tier 1 common3 of $128B, ratio of 8.4%
– Global liquidity reserve of $432B
– Expect to redeem ~$10B of TruPS as they become callable, pursuant to CCAR
(Note: Scan of JPM’s thank you card and box of chocolates to the Basel Committee for the TruPS redemption not publicly available)

Deutsche Bank
– Expected Basel III Tier 1 Common ratio of 8.8% by Jan 2013
– 19% reduction in secured funding and shorts from Dec 2007 to March 2012
– 13% growth in funding from retail deposits
– Substantial detail on liquidity reserves as of March 2012 (see page 23)

Related Posts

Previous Post
Singh and Stella on the velocity of collateral: banks just don't trust each other. We think there is more to it.
Next Post
Another shoe drops: Basel Committee and IOSCO issue consultation paper on margin for non-cleared derivatives

Fill out this field
Fill out this field
Please enter a valid email address.


Reset password

Create an account