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Section 5: Prospects for financial stability

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  1. Section 5: Prospects for financial stability

  2. Chart 5.1 Selected European government bond spreads(a) • Sources: Thomson Reuters Datastream and Bank calculations. • Yield to maturity of benchmark ten-year government bond less yield to maturity of benchmark ten-year German government bond. • December 2011 Report.

  3. Chart 5.2 Changes in sovereign and banking sector CDS premia(a)(b)(c)(d) • Sources: Capital IQ, Markit Group Limited, Thomson Reuters Datastream and Bank calculations. • The change is measured from 21 June 2011 to 21 June 2012. • The other countries included, in addition to those labelled on the chart, are Austria, France, Germany and the Netherlands. • Banking sector CDS are asset-weighted. • Five-year senior CDS premia.

  4. Chart 5.3 UK banks’ exposures to vulnerable euro-area countries Sources and footnotes: see Table 2.A.

  5. Chart 5.4 UK banks’ reported and ‘adjusted’ profit before tax for 2011(a)(b)(c)(d) • Sources: Published accounts and Bank calculations. • Barclays, HSBC, LBG, Nationwide, RBS and Santander UK. • PPI provisions add back specific provisions made during 2011 for PPI redress.Banking sector CDS are asset-weighted. • Non-core losses add back reported losses before tax for non-core portfolios wherever disclosed (this includes HSBC’s US run-off portfolio and LBG and RBS’s non-core portfolios). • Lower interest margins add back net interest income that would have been earned if net interest margins had remained constant at 2010 levels.

  6. Chart 5.5 Market-based capital ratios and funding costs(a)(b)(c) • Sources: Capital IQ, Markit Group Limited, published accounts and Bank calculations. • Market-based capital ratios are banks’ market capitalisation as a percentage of published risk-weighted assets. • The sample shown is the largest 20 European banks by assets. • Funding costs are proxied by five-year senior CDS premia. The ‘line of best fit’ shown above illustrates their relationship with market-based capital ratios.

  7. Chart 5.6 Spreads over reference rates on lending to corporates by firm size(a) • Source: Bank of England. • Net percentage balances are calculated by weighting together the responses of those lenders who answered the question. The blue bars show the responses over the previous three months. The magenta diamonds show the expectations over the next three months. Expectations balances have been moved forward one quarter so that they can be compared with the actual outturns in the following quarter. • A positive balance indicates that spreads have fallen such that, all else being equal, it is cheaper for companies to borrow.

  8. Chart 5.7 UK banks’ price to book ratios(a)(b)(c) • Sources: Capital IQ, Thomson Reuters Datastream and Bank calculations. • Barclays, HSBC, LBG and RBS. • Between 1 January 2008 and 21 June 2012. • 2012 data uses total assets as at 2012 Q1 except Barclays which uses 2011 Q4. • Asset-weighted.

  9. Chart 5.8 Aggregate liquid asset holdings of UK banks as a percentage of FSA Individual Liquidity Guidance (ILG)(a) • Sources: FSA and Bank calculations. • UK ‘defined liquidity groups’ for Barclays, HSBC, LBG, Nationwide, RBS and Santander as designated by the FSA for liquidity regulation purposes.

  10. Chart 5.9 Investor perceptions: do Pillar 3 disclosures give adequate information to compare risk-weighting calculations across the banks?(a) • Source: Barclays. • Based on survey responses of over 130 bank equity investors.