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Bank capital：Stress-test mess（转自Economist）

2009-03-01 17:35阅读：

http://blog.sina.cn/dpool/blog/u/1259189395

Feb 26th 2009
From The Economist print edition
ASSESSING banks’ capital adequacy has become almost as tortured as trying to work out their exposures to toxic credit. Disclosure is patchy and a plethora of measures exists, with most banks emphasising those that flatter them most. American regulators hope to clean up the mess by imposing stress tests on lenders and requiring them to raise new capital, probably from the government, to plug any shortfalls. Behind the scenes such a test will probably require banks to meet a given, but undisclosed, standard of capital adequacy. It will also involve checking that asset valuations reflect the possibility of a severe recession.

Judged by tier-one capital, a common measure of adequacy, America’s ten biggest banks by assets appear in reasonable shape. Typically,
their ratios of tier-one capital to risk-weighted assets exceed 10% (see chart). However, the quality of their tier-one capital has crumbled. Only about half now consists of tangible common equity, the purest and most flexible form of capital which bears the “first loss” when an asset goes sour. The rest is largely preference stock, much of it government-owned, which is not truly loss-bearing. For example, the dividends on Citigroup’s government preference shares can be deferred but not cancelled, unlike those on common stock. The original Basel rules on capital adequacy sought to limit such “hybrid” capital that sits between equity and debt. But most governments like preference stock because it does not carry votes, and thus avoids nationalisation, and because the more secure dividends protect taxpayers, providing the bank does not go bust.
Markets, however, have not been playing ball. In the past two weeks the share prices and, more scarily, the credit spreads of banks with the lowest-quality tier-one capital have deteriorated sharply. This suggests the new stress test should target “equity tier-one” capital, which strips out preference stock. The simplest way to bolster this is to convert state preference shares into common equity. This has already happened in Britain, at Royal Bank of Scotland, and has been discussed at Citi.

In theory, how much common equity might America’s top ten need? Suppose they had to hit JPMorgan’s equity tier-one ratio of 6.4%. Although the bank has just cut its dividend it still views its balance sheet as a “fortress”, and the safest European banks have similar ratios. Six banks would fail this test. They would need an estimated $107 billion of new common equity in total. The state has already invested about $130 billion of preference stock in these firms. So by switching this into common shares regulators could get the laggards up to the mark. If this were done at market prices, Bank of America and Citi would pass into majority government control. The state would have big minority stakes in PNC Financial Services, US Bancorp and Wells Fargo.
Unfortunately, anxious to avoid such overt intervention, the government has opted for half-measures. Its desired equity tier-one ratio remains unknown. Any hole will be filled by exotic preference stock that will turn into common equity only as losses materialise. If this fuzziness is not enough to spook investors, the other component of the test, the checking of asset values, may well be. Although the government seems keen to talk up banks’ balance sheets, lenders’ records and the deterioration of the economy mean that further big write-downs cannot be ruled out.

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