Howard Mustoe’s article on banking strength is here. Quite long, but worth it (of course!). It quotes Durham University Professor Kevin Dowd and former Bank of England regulator Dean Buckner saying the most appropriate capital measure is a market value one, which is based on banks’ share prices.
This is calculated by multiplying the number of shares in issue by the current share price. They prefer this measure because share prices are an up-to-date reflection of what investors think a company is worth, whereas the banks’ reported figures are not.
True, although other miserable people say to focus on book value.
In other news, the Daily Mail mentioned the Hosking article yesterday, in a mostly rehashed version of it. The comments section always worth reading in the Mail, if only for the light they shed on the need for investor education. The best argument against com boxes is the contents of them, as they say.
Also don’t forget to tune in to Parliament TV today, which may seek an answer to the exam question hinted at here:
Life insurance firms’ solvency ratios have been resilient to market conditions over 2020 Q1. This has been helped by: the transitional measure on technical provisions, which offsets to some extent the impact of falls in nominal interest rates; and the matching adjustment, which significantly cushions the impact of spread widening. However, life insurance firms remain exposed to possible losses on their assets from rating downgrades and defaults as a result of the economic effects of Covid-19. This could directly reduce their own funds and increase the Solvency Capital Requirement, thus reducing solvency coverage ratios.
The star studded cast includes Andrew Bailey, Ben Broadbent, Sir Jon Cunliffe and others. Bring masks and cushions.