‘An Avoidable History’
Wilkinson’s report, titled “The Financial Crisis of 2015: An Avoidable History,” isn’t so sanguine. The 24-page study describes how banks, unwilling to accept the lower returns on equity, or ROEs, that result from higher capital requirements, may fuel a new bubble by chasing high returns in commodities or emerging markets. Regulators, by focusing their restraints on banks, may drive risk-taking into unregulated funds that also pose danger to the system.
The report urges bank executives and shareholders to accept that returns of the past are unsustainable and that they need to do a better job of monitoring risks, especially in areas that produce unusually high profits.
“Banks need to be less leveraged,” said Wilkinson, 38, who has an engineering degree from the University of Cambridge’s Trinity College and has worked since 1993 at Oliver Wyman, where he focuses on risk management. “The true test for me of whether they’ve deleveraged is if the industrywide ROEs come down. If they don’t, I’m very suspicious that there are hidden risks in the system.”
via Loneliest Man in Davos Foresees 2015 Bank Crisis While Global Elites Party – Bloomberg.
Interesting how creative banking gets, and how the Banks, the Regulators, and the Buyout Groups interplay in the behind the scenes financial world.
“The use of such funding can reduce the riskiness of the assets and free up regulatory capital, David Abrams, in charge of European nonperforming loan investments at Apollo Global Management in London, said in an interview.
“The risk for the banks changes,” he said. “In a way, they are turning nonperforming loans into performing loans.”
The buyers need to inject sufficient equity for the banks providing vendor financing to benefit from a regulatory capital point of view, said Alexander Greene, managing partner at New York-based private-equity firm Brookfield Asset Management LLC.
“Ultimately, regulators scrutinize those deals,” Greene said. “The question is then, will the investors be able to earn their returns if they overcapitalize?”
Banks must be innovative to sell the “stickiest” of their assets, said Ian Gordon, an analyst at Evolution Securities Ltd. in London.
“Banks will be naive if they use vendor finance to notionally dispose of assets at whatever price the market will take,” he said. “They could fall in the trap in giving away the upside without meaningfully reducing the downside.” “
via European Banks Get ‘False Deleveraging’ – Bloomberg.
“The Property Assessed Clean Energy (PACE) legislation enables property owners to accept a voluntary tax assessment as a means of repaying upfront financing of energy efficiency and renewable energy improvements. Twenty-six states in the United States, along with Australia, and New Zealand, have enacted legislation enabling the secure and scalable financing PACE structure. PACE has yet to take off in the U.S. for homes because of uncertainties in the financing of the program from Freddie Mac and Fannie Mae. But, the commercial side, now solidly financed, can take off.
The key motivator behind PACE is a sound one: there’s “no upfront capital cost.” No upfront capital cost was a key in unlocking the deployment of solar when, at SunEdison, I created the power purchase agreement for the solar industry. It enabled companies like Walmart, Staples, and Whole Foods to buy energy rather than buying a solar system. They pay for the energy used over time. It made solar make business sense.
Now, with this business consortium, we are unlocking the financing for the deployment of 20-year old technologies like more efficient lighting, cooling and heating, and water saving toilets.
When I tell most people about this new program, the immediate reaction is, “Well that’s a no brainer.” But simple, obvious, powerful, business-sense solutions take brains. It then becomes a “no brainer decision” for buyers creating $500 billion dollar industries.”
via Unlocking a $500 billion green industry, without government aid — Cleantech News and Analysis.