Debt

Car debt adds horns to UK’s Brexit vulnerability

31 May 2017

Britons’ non-mortgage debt has been growing at a 10 pct annual clip, of which half the growth is car financing. The risk for that lies not with banks or borrowers but car companies. If they pull back, a post-Brexit Britain could end up with less consumption – and less employment.

Italy’s latest bank mess allows EU to act tough

25 May 2017

For a variety of reasons, the European Commission hasn't forced losses on Monte dei Paschi senior creditors. Tumbling bond prices of the smaller Veneto banks suggest they will be an easier target. Robust action would partially restore the credibility of Europe’s bail-in regime.

Indian banks pile up risks with shock absorbers

25 May 2017

Lenders have pumped out more than $7 bln of contingent bonds that are written down if capital falls short. But implicit state support means investors are ill-prepared for losses. As some banks edge close to missing coupons, it is easy to imagine a system-wide freakout.

“Too big to fail” trade backfires in Baku

24 May 2017

International Bank of Azerbaijan is restructuring $3.3 bln of foreign debt after loan and currency losses. Bondholders had counted on the Caucasus state to prop up the lender, despite weaker finances. The hunt for yield in emerging markets is bound to throw up other nasty shocks.

Sovereign downgrade will keep Beijing on its toes

24 May 2017

Moody’s has downgraded China for the first time since 1989, now ranking it below Taiwan. It is mostly symbolic as foreign debt ownership is minimal and local corporate ratings follow their own logic. But the public reprimand will check Beijing's ambition to attract funds onshore.

India’s RBI risks a reputational downgrade

23 May 2017

The central bank may pick credit agencies to rate stressed loans, and help pay for the job. It is a bid to stop borrowers shopping for good scores. That could force agencies to adapt. But the idea may lead the regulator further into commercial decision-making.

ECB snared by bond-buying ambiguity

19 May 2017

European lawmakers have called for more transparency from the European Central Bank over its corporate bond purchases. The demands are flawed: the ECB discloses quite a lot and clarity can backfire. Yet it’s a reminder of the risks from central banks meddling in private credit.

German bonds are caught between Mario and Macron

12 May 2017

Euro zone yields have risen in anticipation of tighter policy from ECB President Mario Draghi. But the euro zone’s fragility puts a cap on long-term rates. Changing that would require the kind of common fiscal policy imagined by new French President Emmanuel Macron.

Relief offer hints at solution for Fannie, Freddie

11 May 2017

Regulator Mel Watt wants the housing-finance firms to rebuild their capital buffers to avoid fresh bailout risk. It’s a temporary band-aid while the administration ponders the firms’ legal status. Yet Trump’s Treasury should seize the idea as the basis for more-lasting reform.

India loan waiver opens financial doors for Modi

19 Apr 2017

The country's biggest state will write off farm loans worth $5.6 bln. Pressure is building for a nationwide move that might cost 2 pct of GDP. That would be bad for credit and fiscal discipline but help win votes, ease rural economic stress, and give cover to any bigger bank bailout.

China’s smaller banks flunk hard decisions

12 Apr 2017

Big banks' annual results suggested China's bad debt problem is easing. Alas, the picture at smaller institutions remains grim. Some, like China Everbright, rolled over lots of shaky loans. It would be easier in the long run if these lenders started recognising more losses now.

China’s offshore bond revival could be brief

24 Mar 2017

Companies are rushing to sell dollar bonds overseas, aided by a new ability to issue onshore guarantees. Yield-hungry foreign investors are keen. But as liquidity tightens and rates rise, expect more defaults. Those pledges could prove unreliable if things go wrong.

China has leeway to tackle local debt mountain

7 Mar 2017

Authorities say cutting the $2.2 trln local government debt pile is a 2017 priority. Past attempts failed. An improving economy gives Beijing room to address the issue, in part by boosting local tax power. Possible higher interest rates and lower land prices argue for haste.

Review: Libor revealed dark underbelly of trading

3 Mar 2017

Two new books show how the benchmark interest rate underpinning many of the world's financial products was rigged. Jailed trader Tom Hayes leads a cast of deceitful or inept bankers, brokers and regulators. Yet both tomes might have said more about how to stop future malfeasance.

Rate tweak whiplashes UK insurers

27 Feb 2017

Insurance companies will have to pay more for injury claims after the government said payouts must be discounted at a negative rate. The metric was too high before, and arguably still is. The real mystery, though, is why financial risk ends up with claimants, not insurers.

Carlyle hedges against American greatness

23 Feb 2017

Tax-cut fever may be gripping Wall Street but the buyout firm led by David Rubenstein is embarking on its biggest quest for distressed assets. The $2.5 bln fund is a good reminder that lofty valuations, an aging recovery and a chaotic new administration can produce bad outcomes.

French corporate debt immunity to Le Pen will fade

15 Feb 2017

Even the slim possibility that far-right leader Marine Le Pen might lead France out of the euro zone has pushed up government bond yields. By contrast, corporate debt has suffered relatively little damage. Savvy investors will make this anomaly disappear soon.

UK watchdog trolls EU with City Brexit manifesto

14 Feb 2017

European bankers often fear a post-EU Britain will become an offshore casino. The FCA’s consultation on the UK’s listing regime mostly focuses on worthy goals like tech financing. But some proposals – like laxer listing standards for foreign companies – could feed the paranoia.

Singapore banks running out of profit defences

14 Feb 2017

Singaporean lender OCBC posted disappointing results due to higher bad debt charges, driven up by delinquencies in the energy sector. Banks in the city-state have propped up profits by running down bad debt provisions, but that leaves them increasingly vulnerable.

UK student debt sale is a third-class idea

9 Feb 2017

The government is selling 12 bln pounds of student loans. If wage growth motors, the sale price could wind up looking cheap. Given its reluctance to sell RBS shares that are depressed in value, and the reduced imperative to balance the budget by 2020, it's a needless risk to run.