The Cost of (Equity) Capital

For years, the world’s largest banks have been up in arms over threats by regulators to increase their (equity) capital requirements. Making banks hold more capital, they argue, will force them to reduce lending and will increase their cost of funding, making credit more expensive throughout the economy. One of the chief defenders of the megabanks […]

Troika Demands Another €6 Billion from Cyprus, Making ‘Rescue’ Bigger Than GDP

Nothing like dramatic proof that austerity is a failure. Less than one month forcing Cyprus to take a “bailout” (which in reality was paid for entirely by the Cypriots) under the threat of effectively throwing them out of the Eurozone, a leaked Debt Sustainability Report shows that that the Troika will demand another €6 billion from Cyprus, increasing the total […]

Follow-up: Further Program Notes for the Cyprus Banking Drama

Last Friday I sketched out some program notes for the Cyprus banking crisis. The notes explained the origin of the banks’ losses (Act 1) and the tools that regulators could choose from to resolve the crisis (Act 2). Now the curtain has gone up on Act 3. The government of Cyprus and the EU-ECB-IMF “Troika” […]

Are Banks Safe Enough? Do we Really Know? Risk Weighting, Regulatory Arbitrage, and other Issues

During the global financial crisis, people in the United States, Ireland, Iceland, and many other countries learned that undercapitalized banks can spell trouble for the whole economy. The Basel II rules that were supposed to prevent widespread bank failures proved inadequate. In response to the crisis, the world’s central bankers and bank regulators started work […]

Turkish Monetary policy’s ‘Groundhog Day’

I wasn’t planning on writing about monetary policy, but reader comments seem to hint that some of the steps taken by the Central Bank at its rate-setting meeting on Jan. 22 were unclear. Here’s my latest Hurriyet Daily News (HDN) column, on last Tuesday’s Central Bank of Turkey rate-setting decision, where I go over the […]

Irrational exuberance a la Turca

As I argued in my Jan. 11 column and later at my blog, last week’s rally in Turkish assets was caused by money flowing into emerging markets. Negative economic news, such as lower growth forecasts from the World Bank and Germany, tampered with capital inflows this week. As a result, while emerging markets’ stocks fell […]

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