We’re not quite back in Kansas

Was it all a nightmare?


I have a rather bizarre memory of some guy with a penchant for Burberry scarves threatening to implode the Eurozone. Then there was something about big trouble in big China.

And that guy in Frankfurt… He couldn’t have cared less. Get used to it? Thanks for nothing, Mario. The less said about regulators the better.

Seriously, did we really make it through all that?

It appears so.

Indeed when it comes to hybrid capital, not only did we survive, but we came out alive and kicking.

Who can argue with AT1 achieving the best returns in the credit markets? Those who braved the subordinated markets in 2015 can be pleased with their call.

Supply may have disappointed, but this at least eased pressure on spreads and allowed the maturing asset class of AT1 to find a better equilibrium, while Tier 2 avoided a potentially dangerous deluge.

Are we home and dry?

Not quite, Dorothy.

Federal Reserve chair Janet Yellen is not the Wicked Witch of the West and is cognisant of the tornado that rising US rates could unleash on the financial markets, but they may prove to be forces beyond her control.

Regulators, meanwhile, will continue to pull the levers behind the curtain, but can they be trusted? The final TLAC terms sheet released in November sprung no nasty surprises. However, we may yet be humbugged as further details emerge on MREL, Pillar 2, RWA floors and the like.

Those looking for some place where there isn’t any trouble might therefore wish to search elsewhere.

Neil Day, Managing Editor