Category: capital

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Kenny on the Global Financial Crisis

Source: Federal Reserve, St Louis; US census bureau

Tom Kenny, chair of the Equity Release Working Party, Staple Inn 28 February 2019

… I would say what hasn’t come out of the paper is what the difference between those two approaches [i.e. Real World and Risk Neutral] is, and that’s something the working party wants to look at, to say .. what is the difference between the two approaches, and then have that policy debate, because, you know, market consistency is obviously where we are today in a large part of the financial industry, but market consistency doesn’t necessarily work. [The] global financial crisis was largely driven by the investment banks and the banking approach to modelling risk and that’s purely a market consistent approach.

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Date for your diary

This will apply to a limited number of our readers, but here it is anyway. Just Group are having a general meeting on Wednesday 16 March, to seek authority from its members to issue restricted tier 1 bonds convertible into ordinary shares on the occurrence of ‘trigger events’.

The first resolution is to provide the directors with power to allot up to £42m or about 45% of the nominal value of existing share capital in connection with the issue. Remember the nominal value relates to 10p shares whose market value (last time I looked) is is about 95p, so this amounts to a considerable dilution. The second is that the new shares will not be offered to existing shareholders.

Now convertible bonds are nothing new, the interesting factor is the trigger event upon which conversion occurs.

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More on Jonathan Ford on the UK’s Undercapitalised Banks

Kevin Dowd, 5 December 2018

Capital heaven

Dean wrote positively yesterday about Jonathan Ford’s Financial Times piece “The Illusion of UK bank capital strength,” published on 2 December 2018.

Jonathan is right to warn about UK banks being under-capitalised and it’s good to see a journalist of his standing picking up on this issue.

It is however disheartening to see some of the disgraceful abuse made in the ‘comments’ section underneath his article. “Please keep comments respectful,” the guidelines say. “By commenting, you agree to abide by our community guidelines and … terms and conditions.”

Maybe the FT should consider introducing a moderation process to filter out such abuse in future.

Turning to the subject at hand:

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