Comments on: Is the Commonwealth Bank cashing in or crashing?

By: green

green — Thu, 01 Jan 1970 10:00:00 +0000

This is a carbon copy of what has been going on the USA. IBs and banks come out with grand statements about how all is well (causing suckers rallies) and then they turn around and hit the Fed window. This works out well for everyone as long as regulators are willing to let the banks lie. However, on the 7th in the USA, the SEC finally grew some testicles, and announced “Data on capital and liquidity will be required this year ‘in terms that the market can readily understand and digest’”. (see http://www.sec.gov/news/speech/2008/spch050708cc.htm) Needless to say, this scared the bejesus out of the US market who seemed to have been under the impression that the SEC would keep looking the other way as far as financials were concerned. Maybe in 3-6 months, Aussie regulators will grow some testicles too.

By: Michael Cornips

Michael Cornips — Thu, 01 Jan 1970 10:00:00 +0000

Since 1st January 2007, CBA has issued 36,000,000 shares worth about $1.6b. ANZ has issued 78,000,000 shares worth $1.74b at current prices. Capital is Capital.

By: Andrew Gregory

Andrew Gregory — Thu, 01 Jan 1970 10:00:00 +0000

Now what’s going on here?

By: Campbell Dawson

Campbell Dawson — Thu, 01 Jan 1970 10:00:00 +0000

Everybody seems to be confusing capital and liquidity. Selling RMBS to the RBA doesnt create capital; all it does is allow CBA and others to exchange one asset they hold (RMBS) for another (cash) which they can lend out to businesses homes etc. It’s like you and me selling our house to buy shares; our net worth doesnt change. The only way they can generate higher capital ratios is by raising new capitial or shrinking their balance sheet. In fact, repo-ing RMBS and lending to businesses will generate a higher capital need. The RBA has done very well to ensure that there has not been unnecessary credit rationing the last 6 months