Cruse
Associates, Scandinavian Banks, G-20 Meeting, Everbright: Compliance
Scandinavia’s biggest banks have failed
to curb funding risks linked to financial innovation and will probably only
avoid downgrades if national regulators force through stricter measures,
according to Standard & Poor’s.
Steps taken to date by lenders including Denmark’s Danske Bank A/S (DANSKE) and Nykredit
A/S, as well as Nordea Bank AB (NDA) and Svenska Handelsbanken AB (SHBA) in Sweden, aren’t enough, said Per Tornqvist, a Stockholm-based
analyst at S&P. As competitive pressure “forces banks to maintain
short-term funding,” regulators need to step in and help banks extend their
funding maturities, he said.
AAA-rated Scandinavia’s biggest banks are more vulnerable to
funding shocks than their peers in the U.S., France and Italy, according to a
July analysis by S&P, which measured liquidity risks five years after the
collapse of Lehman Brothers Holdings Inc. paralyzed the global financial
system. The rating company criticized Nordic lenders’ practice of using funds
as short as one year to finance loans as long as 30 years, as well as a
reliance on short-term offshore borrowing.
Swedish banks are more dependent on market funding than banks in
most other countries, according to the Financial Supervisory Authority in Stockholm.
In Denmark, home to the world’s largest mortgage bond market per
capita, banks refinance as much as $228 billion annually, spread over quarterly
auctions. About 50 percent of Danish borrowers refinance their mortgages
annually, according to the FSA in Copenhagen.
Efforts to sidestep funding mismatches by inventing new securities
will do little to persuade S&P the lenders are really addressing liquidity
risks, Tornqvist said.
Banks are responding to the latest regulator demands that they
protect themselves against funding misalignments by inventing new securities.
Merkel Says
G-20 Agrees on Regulation Plan for Shadow Banks
Group of 20 summit leaders in St.
Petersburg Sept. 6 agreed on a road map for
regulating shadow banks throughout the G-20, German chancellor Angela Merkel told reporters after the meeting.
Leaders from outside Europe “recognize that the euro areas crisis
isn’t over yet but that confidence is returning, and when structural reforms
continue and if we keep to our commitments and show we’re reliable -- that then
we can overcome this crisis step by step,” Merkel said.
Merkel also said the G-20 leaders agreed to extend a commitment to
refrain from new protectionist measures for another two years.
Carney Calls
for Bank Risk-Model Clampdown to Repair Trust
Regulators must restrict lenders’ ability to escape tougher
capital rules by changing how they measure risk, Financial Stability Board
Chairman Mark Carney said, as he urged nations to finish an overhaul of bank
rules.
“The risk models that banks use to calculate their capital needs
show worryingly large differences,” Carney, governor of the Bank of England,
said in a letter Sept. 5 to leaders from the Group of 20 nations meeting in St.
Petersburg, Russia.
“This must be addressed for depositors, investors, clients and authorities to
have full confidence in the strength of bank balance sheets and their
resilience during a downturn.”
The Basel Committee on Banking Supervision, an international
regulators group, said in July that some lenders were backing investments with
as much as 20 percent more capital than other banks. European
banks generally apply lower risk weights to their holdings of bank-issued debt
than lenders based elsewhere, the Basel group said.
International standards set by the Basel committee require banks
to meet minimum capital requirements, measured as a percentage of their assets.
