Tier 1 Capital: 118.8
A: Tier 1 Common Capital: 22.92
B: Risk‐Weighted Assets: 996
C: Total Estimated Losses: 104.7
D: Resources Other Than Capital to Absorb Losses: 49.0
Target SCAP: (0.06*B) – A + C – D
Target SCAP: (0.06*996) – 22.92 + 104.7 – 49.0 = 92.6
Citi already has 29.0 from “Capital Actions and Effects of Q1 2009 Results”
and 58.1 from “Other Capital Actions, including impact of preferred exchange offers”
Need to raise: 92.6 – 29 – 58.1 = 5.5
Nemo:
I have made an another post, which “hopefully” is not wrong.
Thx your comments, I hate YES men ;_)
It does not happen often… Which is why I am enjoying it so much. :-)
Nemo:
“You are simply wrong on this one, jck.”
It happens…Will check where the “problem” is later.
P.S. The best guess so far for the right explanation, IMO, is here.
Actually, I did read the paper.
Yes, it says “6 percent Tier 1 capital” AND “4 percent Tier 1 Common capital”. Your calculations use COMMON capital (22.9B), and so they should be using the 4% ratio, NOT the 6% ratio.
And at the risk of repeating myself, I am telling you that if you apply precisely the same math to any other column of the table, it does not add up. You can point me to the paper all you want, and I will point you right back at it. You are simply wrong on this one, jck.
Nemo:
Citi is the easy one to figure out, I don’t have time to explain all one by one but it helps to read the paper.
page 3 of The Supervisory Capital Assessment Program: Overview of Results
“….9 of the 19 firms already have capital buffers sufficient to get through the adverse scenario in excess of 6 percent Tier 1 capital AND 4 percent Tier 1 Common capital.“
I do not think this is right.
First, 6% is supposed to apply to COMMON Capital, not total Tier 1. Your calculation is for total Tier 1, for which the target ratio is supposed to be 4%.
Second, if you apply the same math to any other column (i.e., any other bank), the numbers do not add up.
I am not saying I know what is right; I am just saying this is wrong. :-)
Agree, and to see how pointless the exercise is, target SCAP + Tier1 Common Capital is actually lower the T1.
Also Citi benefits from lower risk-weighting at 20% for some toxic junk guaranteed by the gov.
Again what really stresses me out is the continuing reliance on “risk-weighted” assets when they must know by now that risk weighting has in itself been a prime source of systemic risk. Not only are the weights completely arbitrary, like for instance 20% for triple-A rated assets, but also those weighing, the credit rating agencies, have clearly shown themselves not to be very trustworthy.