The Consequences of the Global Financial Crisis

Banks are much better capitalized, mostly all around the world than they were before the crisis. But there is still problems with operational risk, which are hard to model and regulate. Credi Suisse was a long story of a lot of operational risks and a slow burn. And so you see that work now, because I think most of the stress is now gone in European banks.

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The more capital a bank holds, the more losses it can take before going bust. Dr. Martien Lubberink, professor at Victoria University of Wellington, joins Forward Guidance to define regulatory bank capital and put it in context of the conspicuous bank meltdowns in March. Lubberink opines on the issues at Credit Suisse & Silicon Valley Bank through the lens of bank capital, and he shares insights on the health and nature of the banking system of New Zealand, where he currently resides. Filmed on April 6, 2023.

Follow Martin Lubberink on Twitter https://twitter.com/cetier1

Read Martin Lubberink’s blog at https://capitalissues.co/

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Pieces discussed in the interview:

“The Value of Kiwibank”

Fresh RBNZ Dashboard data shows New Zealand’s largest banks on track to meet increasing capital ratio requirements”

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Timestamps:

(00:00) Intro

(01:39) Lubberink's Background In Bank Capital During The Great Financial Crisis (GFC)

(08:04) What Is Bank Capital?

(13:37) Silicon Valley Bank Was A Masterclass In "How To Not Run A Bank"

(18:16) Banks' Hedging Of Interest Rate Risk

(25:55) Permissionless

(26:59) Important Regulatory Bank Capital Ratios

(37:26) Credit Suisse & Additional Tier 1 Bonds

(46:14) Operational Risks

(48:11) "New Zealand Banks Are Among The Most Resilient Banks In The World”

(51:32) Interest Rate Hedging Again (Jack Is Obsessed)