-
Industry observers are advising more community banks with trust-preferred securities to raise capital now before Basel III puts them at odds with regulators.
August 22 -
Wells Fargo’s origination business has been operating at full steam, keeping the company’s mortgage servicing assets well above a cap proposed under Basel III. A new servicer compensation system could resolve the issue, but something has to give.
March 22 -
Risk-weighted assets are set to surge by a third, but the Big Four expect to avoid selling shares through nips and tucks and a decade of transition.
November 29 -
If U.S. bank losses from the most recent crisis will total about 7% of assets, a "good-times" buffer of about 15% might be needed to keep them lending in the next one.
August 17
The demise of trust-preferred securities may not be so bad for the banking industry after all.
First, it will do little harm. The vast majority of about 600 bank holding companies with outstanding trups at June 30 would maintain Tier 1 ratios above 8.5% without the securities. (The data here covers institutions that reported consolidated financials to regulators.) And that minimum requirement would not be fully phased in until 2019 under
Sixty-five holding companies with Tier 1 ratios higher than 8.5% would fall below the threshold without their trust-preferreds, and some could face
Among the 114 overall that would have Tier 1 ratios below 8.5% (including the 49 that are already shy of the mark), however, about half have Texas ratios (percentages of bad debt to capital and loss reserves) higher than 75% - suggesting deeper problems than the reclassification of trust-preferreds under regulatory capital rules.
Meanwhile, Susquehanna Bancshares (SUSQ) in Lititz, Pa., where trust-preferreds accounted for about a fifth of Tier 1 capital at June 30,
CVB Financial (CVBF) in Ontario, Calif. – which had a Tier 1 common capital ratio of 16.3% at June 30, well above the proposed minimum of 7% that would go into effect in 2019 – estimated in July that the $20 million of trust-preferred debt it redeemed the month before would save it $650,000 annually.
Chief Executive Chris Myers told investors on a conference call that the company was “floating in cash like crazy,” and might continue to “chip away” at its remaining trust preferred obligations.
“We want to get as lean and mean on the cost side and the funding cost side as we can,” he said.