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Does 'regulatory capital' mean debt?

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Tue, 2010-09-14 11:18

#1

thanks

Does 'regulatory capital' mean debt?

Banks to write off debt yet be bailed by publics (as the pdf appears to support).

If banks are able to 'write off' debt, nations ought to be able as well.

Conversely, banks could be required to pay their debts, and publics could buy back public debt using national collateral.

Instead of continuing to support bankers, publics could support depositors, pensioners, homeowners, students, etc. directly.

note particularly the first link, the pdf, in the context of the htm press releases.

http://www.bis.org/publ/bcbs174.pdf

http://www.bis.org/press/p100912.htm

http://www.bis.org/publ/bcbs174.htm

http://www.bis.org/press/p100819.htm

___

the media circus around last weekend's BIS 'capital requirements' announcement is to grease the wheels for more public bailouts through public loan facilities.

the pdf linked here spins 'writing down regulatory capital' as banks responsibly taking losses when they mess up. but it may mean writing off their own debt, while expecting publics to pay up.

Thu, 2010-09-16 11:22

#2

thanks

According to 1988 definitions, Tier 2 capital includes debt.

http://www.bis.org/publ/bcbs04a.pdf?noframes=1

"(e) Subordinated term debt: includes conventional unsecured subordinated
debt capital instruments with a minimum original fixed term to maturity of over five
years and limited life redeemable preference shares. During the last five years to
maturity, a cumulative discount (or amortisation) factor of 20% per year will be applied
to reflect the diminishing value of these instruments as a continuing source of strength.
Unlike instruments included in item (d), these instruments are not normally available to
participate in the losses of a bank which continues trading. For this reason these
instruments will be limited to a maximum of 50% of tier 1." p.20

Similarly in 2006: http://www.bis.org/publ/bcbs128.pdf under Annex 1a) Definition of Capital.

According to Basel III, http://www.bis.org/press/p100912.pdf?noframes=1

"The total capital requirement remains at the existing level of 8.0% and so does not need to be phased in. The difference between the total capital requirement of 8.0% and the Tier 1 requirement can be met with Tier 2".

So, yes, the banks can write off debt.

Therefore nation states should also be allowed to write off debt.

____

The bigger problem of course is that even the basic Tier 1 capital is made up of shares which themselves are creations of money.

So banks are only taking 'losses' of fluff they created in the first place, which we allowed them to create, while the public gets healthcare, water, energy, education, welfare, etc. slashed and privatized to 'pay off our debts'.

Thu, 2010-09-16 11:55

#3

thanks

Also from the Basel III link,

"Existing public sector capital injections will be grandfathered until 1 January 2018."

http://www.bis.org/press/p100912.pdf?noframes=1

So banks can cut as losses the money we bailed them out with.

______________________________

In sum:

1) The increased capital reserve requirements so lauded by pundits, politicians and central bankers like Mark Carney are fluff based on an international money system that allows private banks to create money.

2) The August 19 proposal http://www.bis.org/publ/bcbs174.pdf currently up for comment to be finalized at the next G20 meeting in November, allows banks to write off debt.

Banks make more money by spinning debt exponentially, so they can claim this is somewhat of a 'loss', but it's like letting them turn a spoon of sugar into a three-cubic metre pile of candy floss and forcing them to take a bite of the latter.

Big loss.

Then they have the audacity to use this 'loss' to say, 'we're taking a haircut so the public won't feel so bad bailing us out again.'

and, 'we're taking a hit so the public should take a hit too'. regarding this 'argument' the public can say, 'we'll take the same haircut you did and give ourselves a jubilee.'

Then we can take back our own powers of money creation so fraudulent banksters never have the chance to play out this charade again.

Thu, 2010-09-16 12:20

#4

George Victor

You and the late Joan Robinson would have got along like a house on fire on the subject of exchange rate controls, thanks. But she despaired at turning it around in the late 70s. I don't know how you would get there at this point.

Thu, 2010-09-16 18:24

#5

thanks

"take back our own powers of money creation" means the public

discontinues the ability of private banks to create deposits and assets from nothing,

and instead uses parliament's power to create money without interest.

Use of the Bank of Canada to create money - by having the nationalized BofC buy government bonds- got us out of the Great Depression.

Sat, 2010-09-18 19:00

#6

thanks

now to clarify the subject ;

A bank creates a loan by simultaneously entering the amount as an asset and a liability.

It creates in its ledger a deposit from thin air (liability) and a loan from thin air (asset).

The loan it makes is entirely based on the bank's liability.

The August 19 BIS pdf says banks can write down regulatory capital in the event of non-viability, but this will necessarily mean writing down the amount of loss from both sides of the ledger- the amount of loss will be written off the asset side of the ledger as well as the liability side.

so in writing down losses, banks will be writing down liabilities.