Public credit rating agencies discriminate against the UK and in favour of EU/Eurozone member states

Rating agencies discriminate against the UK

Published on 18th April 2023

Public credit rating agencies have not been even-handed in their treatment of the UK compared to EU member states, given the large shadow debts and contingent liabilities that weigh on the latter.

This is explained in the newly-released book ‘The shadow liabilities of EU Member States, and […]

Scope of EU and Eurozone debts is unrecognised by public credit rating agencies

Public credit rating agencies over-rate EU issuers

Published on 16th April 2023

The public credit ratings of EU/Eurozone member states are inflated, because the credit rating agencies have not factored in the significant shadow debts and other financial liabilities bearing down on the respective member state’s debt service capacity. Total financial liabilities are much higher than these […]

Germany cannot pay totality of EU/Eurozone debts, contrary to assumptions of global debt markets

Germany cannot afford all the EU/Eurozone debts

Published on 15th April 2023

Global debt markets appear comfortable to absorb all of the bonds issued by the European Union for its €750 billion Coronavirus Recovery Fund on the basis that ‘it all tracks back onto Germany’. This is true: the guarantee structure behind the EU’s debts makes each […]

EU and Eurozone break both the spirit and the letter of global debt rules

EU and Eurozone break global debt rules

Published on 14th April 2023

The EU and its member states position themselves as a cornerstone of the rules-based international order, but they break its financial rules in both letter and spirit by failing to fully report their financial liabilities. The key measure tracked by Eurostat – ‘General government gross […]

EU and Eurozone debts are a risk to global financial stability

EU/Eurozone debts: a risk to global financial stability

Published on 13th April 2023

EU and Eurozone member states understated their debts at the end of 2021 by 44% of EU GDP and their total liabilities by 70%. This represents a major risk to global financial stability, as the understatement causes shortfalls of capital and collateral at the […]

EU and Eurozone are massively over-indebted – but official figures obscure it

EU and Eurozone are over-indebted

Published on 12th April 2023

EU and Eurozone member states fail to fully report their financial liabilities. The key measure tracked by Eurostat – ‘General government gross debt’ – is circumvented to such an extent that, based on year-end 2021 figures, debts of around €6.4 trillion failed to be registered, and contingent […]

Risk-weighting – how to fake up resilience in a banking system

Published on 6th April 2023.

The underlying article was published by IREF Europe on 5th April 2023.

Introduction

How resilient is the global banking system? Are banks’ capital buffers now much larger than they were going into the Global Financial Crisis of 2007/8, as authorities claim?

The buffers – called ‘Common Equity Tier 1’ (or CET1), ‘Tier 1 Capital’, […]

Bank Resolution is dead: authorities dare not use it – and instead risk destroying capital markets

Published on 1st April 2023.

The underlying article was published by IREF Europe on 29th March 2023.

The template created after the Global Financial Crisis of 2007/8 to shield taxpayers from direct bailouts of failed banks has already folded – authorities dare not use it.

The template is to put failed banks into ‘resolution’, with retail and small […]

Liability-Driven Investments crisis shows derivatives remain a systemic risk

Published on 17 December 2022

Introduction

At the end of September 2022 a number of UK companies’ pension plans reportedly came close to collapse. This was to do with a financial instrument called a Liability-Driven Investment or LDI, which is a form of derivative contract.

The explanations given for what occurred have ranged from ill-informed to denial to […]