Reuters - Video

Edition: U.S. | U.K. | IN | CN

Breakingviews

Breakingviews: Fed's poor grade

Friday, March 08, 2013 - 03:27

March 8 - Antony Currie and Agnes T. Crane chastise the watchdog for failing to divulge the effects of rising interest rates in the bank stress tests.

▲ Hide Transcript

View Transcript

Federal Reserve has released its annual -- -- so at least told us who hasn't hasn't failed not the eighteen banks only ally. Jim expected has failed to meet the requirements for how much capitalist path. -- -- -- kit done and instruments these banks contesting that good over the next year as he got enough capital. That when next you next week we'll find out how much it that would give back to dividends turner -- product everything but there's one thing. That the Fed doesn't seem too keen on talking about problems. And this is again this interest rate risk issue -- what happens. When interest rates rise right and for the first time that actually stressed the banks. In a rising interest in the first time in its the sizzle right if they -- that before this is the first year they've actually done that Dodd-Frank and to test right that this was not included in the previous patents. Basically it's a scenario which you know ten year treasury note goes above 5%. Mortgage costs -- -- corporate foreign governments are about an inflationary -- But they didn't release the results. -- this history is -- one of the biggest things banks have to worry about. Interest rate risk investors that this every single quarter what's the net interest -- more you with the interest rates and a -- the Fed's -- knew what happens interest rates go up even though I find it -- -- -- full set 2000. Ferris and ours I would look at interest rates -- -- full full. But clearly we found -- it is looking and it did run the numbers that just isn't -- -- Versailles which is and they say there's a tiny footnote says they're gonna you know evaluate what witnesses you know this would be good information for investors know it's hard for me see. An argument of why it wouldn't because illustrates what we don't worry but the whole idea of the stress assistant estimate it'll be biased and invest is not what's happening and -- -- -- night I would -- are -- to that again at one of the difficult things with evaluating it into -- for big banks is -- -- so many moving -- JPMorgan for example has a huge derivatives -- what does that do to interest rates swaps -- -- what does -- -- to -- deposits that building -- but again we've seen. Lots of deposits going in that are non interest bearing. Money yet above the 250000. FDIC kind of backing what happens of that money went all the sudden. We start getting it in an inflationary environment but how does that impact the bank's funding -- identical -- for right now what we have is what the -- sank behind us but. My feeling is that the Federal Reserve is actually run these numbers yeah investors deserve to know what what it. That's an affair with a look at some of the disclosures of the banks give out an annual Rick pulls the SEC -- nominees Christmas and if interest rates go up X percentage points then. We're looking at this kind of case no improvement whatever days. Which is fine but when we had the sings back and I. That kind of an add on our blog posts and they're not privy to that guy you know would like somebody on the outside government you know on the outside of the factories -- and they particularly if they've actually done it from. Then I feel like that they need to get that information out there so investors know. We what is the risks in terms of race and eventually going. Exactly what Obama deputy none else next week we've got so we got the results of what they just give back to shareholders. Buster is a good thing it does mean you mention this nazism where Mona thought these interest rate maximize the good news is in the policy see the Fed look at such things and good. How -- we should and then a year late set. They changed some may be yet. For me to really think -- -- yeah I think segments that will keep on that come next week's second part of the stress test results. And we'll be back next week it will break movies.

Press CTRL+C (Windows), CMD+C (Mac), or long-press the URL below on your mobile device to copy the code

Breakingviews: Fed's poor grade

Friday, March 08, 2013 - 03:27