The ECB's Asset Quality Review is a work of art - minimalist art

A masterpiece of reverse engineering.

In creating what was a potentially vital part of the project to keep the Euro afloat, the European Central Bank had a mission. They were to design a bank asset quality review that was just tough enough to gain credibility, but not too tough, for fear of scaring the horses and inducing queues of depositors to form outside banks when the results come out.

What we got was a masterpiece of reverse engineering, aimed at achieving just what was required - just enough. It can't be denied there are some tough-sounding parts, some tidbits of rectitude - an examination of gross liquidity ratios, excessive LTRO usage, and rigorous scrutiny of off-balance sheet exposures and the risk-weightings which banks choose to apply to their assets.

We are assured these matters will all receive diligent attention in the AQR, and may even lead to a subjective decision to raise the required capital ratio above the standard level of 7 per cent, (8 per cent for large, systemically important banks). Ok, sure, we'll wait and see what happens!

Very sensibly the AQR will take a Q4 2013 snapshot of balance sheets, so as to discourage banks from indulging in an unseemly fire sale of assets or reduction in customer loans by not giving them enough time to do so.

We even got some headmasterly rhetoric from Mario Draghi along the lines that we must have no fear, the AQR would be stringent enough so that some banks do actually fail, to ensure the process had credibility (preferably very small ones that have little chance of spreading contagion fear). He further insisted that governments must have a backstop in place. This was a thinly veiled tilt at Germany, who is in turn insisting that every cent is bled out of private bond and equity holders, of every possible description, first, before the European Stability Mechanism is tapped for bank re-capitalisation.

The trouble is, this AQR does very little to address the potentially lethal death embrace of banks and their governments that exists as a result of the banks' enormous holdings of sovereign bonds. This is to be expected: a proper risk-adjusted examination of the various hues of government bonds stuffed into banks' balance sheets, with realistic risk weightings, would be far too scary and if it ever saw the light of day, and might just bring the whole Tower of Babel crashing down.

So there were are, just enough to give the banks another year to de-leverage before the European Banking Authority stress tests and, with results not due for a year, just enough time for Germany to become satisfied with the ESM's rules of engagement.

Mario Draghi, president of the European Central Bank (ECB), earlier this year. Photograph: Getty Images.

Chairman of  Saxo Capital Markets Board

An Honours Graduate from Oxford University, Nick Beecroft has over 30 years of international trading experience within the financial industry, including senior Global Markets roles at Standard Chartered Bank, Deutsche Bank and Citibank. Nick was a member of the Bank of England's Foreign Exchange Joint Standing Committee.

More of his work can be found here.

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It's Gary Lineker 1, the Sun 0

The football hero has found himself at the heart of a Twitter storm over the refugee children debate.

The Mole wonders what sort of topsy-turvy universe we now live in where Gary Lineker is suddenly being called a “political activist” by a Conservative MP? Our favourite big-eared football pundit has found himself in a war of words with the Sun newspaper after wading into the controversy over the age of the refugee children granted entry into Britain from Calais.

Pictures published earlier this week in the right-wing press prompted speculation over the migrants' “true age”, and a Tory MP even went as far as suggesting that these children should have their age verified by dental X-rays. All of which leaves your poor Mole with a deeply furrowed brow. But luckily the British Dental Association was on hand to condemn the idea as unethical, inaccurate and inappropriate. Phew. Thank God for dentists.

Back to old Big Ears, sorry, Saint Gary, who on Wednesday tweeted his outrage over the Murdoch-owned newspaper’s scaremongering coverage of the story. He smacked down the ex-English Defence League leader, Tommy Robinson, in a single tweet, calling him a “racist idiot”, and went on to defend his right to express his opinions freely on his feed.

The Sun hit back in traditional form, calling for Lineker to be ousted from his job as host of the BBC’s Match of the Day. The headline they chose? “Out on his ears”, of course, referring to the sporting hero’s most notable assets. In the article, the tabloid lays into Lineker, branding him a “leftie luvvie” and “jug-eared”. The article attacked him for describing those querying the age of the young migrants as “hideously racist” and suggested he had breached BBC guidelines on impartiality.

All of which has prompted calls for a boycott of the Sun and an outpouring of support for Lineker on Twitter. His fellow football hero Stan Collymore waded in, tweeting that he was on “Team Lineker”. Leading the charge against the Murdoch-owned title was the close ally of Labour leader Jeremy Corbyn and former Channel 4 News economics editor, Paul Mason, who tweeted:

Lineker, who is not accustomed to finding himself at the centre of such highly politicised arguments on social media, responded with typical good humour, saying he had received a bit of a “spanking”.

All of which leaves the Mole with renewed respect for Lineker and an uncharacteristic desire to watch this weekend’s Match of the Day to see if any trace of his new activist persona might surface.


I'm a mole, innit.