September 17, 2019

High & Low Finance: Barclays, Caught Short, Is Now in a Bind

So said Chris Lucas, finance director of Barclays, three months ago.

It turns out that a British regulator disagrees.

Shares of Barclays lost 10 percent of their value during the first three trading days of this week after the company disclosed that its capital — as seen by the regulator — needed to grow by 38 percent to be adequate under new rules, unless the bank reduced its assets. And the regulator was not willing to give Barclays as much time as it wanted to raise that capital.

Barclays is scrambling. It plans to sell stock through a rights offering. It plans to raise still more capital through so-called CoCos — contingent convertibles, to the uninitiated. Those are bonds that pay interest unless bank capital levels fall too far. In that case, they automatically convert into stock. It also plans to shed some assets, which reduces the amount of capital that it needs.

Barclays is lucky in one respect. If it were subject to the rules being proposed by regulators for large banks based in the United States, it would need far more capital.

What is going on may come to be known as the revolt of the regulators. They were profoundly embarrassed by the clear evidence that banks were undercapitalized before the credit crisis despite the banks’ claims to the contrary. The revolt is most intense in the financial centers with the biggest banks — the places where the pain to governments would be greatest if another round of bailouts were needed.

It is useful to try to understand why the banks were so undercapitalized that bailouts were needed.

The answer lies in international rules that grew ever more complicated and gave the banks wide latitude to make judgments about the safety of the loans they had made and the securities they had bought.

Bank capital, the financial cushion that banks have to hold to absorb potential losses, is usually expressed as a percentage of “risk-weighted assets.” Some assets receive full weight in the calculations, and some — viewed as virtually risk-free — receive no weight and thus have no effect on how much capital a bank needs.

All that makes sense — if you can figure out the risks. But of course that is not easy. At first, there were fairly simple categories, with a certain type of loan receiving a certain risk allocation. But that led some banks to load up on the riskiest assets within any category and to invent assets that would seem to be low-risk and therefore not need much capital.

As time went on, the rules allowed banks to make more and more judgments. They could use bond ratings from Moody’s or its competitors to determine how safe an asset was. And if they wanted, they could use their own risk models to make the decisions.

How’s that for regulatory abdication? Rather than seek to review and judge bank assets, the regulators essentially allowed the banks to evaluate their own decisions.

After the financial crisis, regulators meeting in Basel, Switzerland, produced a new set of rules, called Basel III. They tightened up what counted as capital and took steps to improve the risk ratings. They raised the required capital levels.

But they did one more thing, and that is turning out to be critical. They adopted leverage ratios for banks.

In principle, a leverage ratio is simple. Calculate how much capital a bank has and divide it by the bank’s total assets, without any risk weighting. In practice, of course, it is not quite so simple. But it is a lot simpler than the other calculation of risk-weighted assets. When all this goes into effect, banks are supposed to meet both sets of rules.

At first, the big banks do not seem to have focused on the leverage ratio. But that is what trapped Barclays and it is what may force several other large banks on both sides of the Atlantic to raise more capital — or dispose of assets to bring down the amount of capital they need.

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Getting Started: For Renters-to-Be, the High-Tech Lowdown

They would be mistaken.

Cracking New York’s real estate code can be daunting, particularly for those without an ample financial cushion or a network of resident friends. But one starting point is visiting a handful of helpful Web sites.

To become a savvier renter, and to avoid deals that are too good to be true, it’s essential to get a good handle on the city’s real estate picture. The standard-bearer is Curbed NY, which mixes commentary about properties on the market with news and gossip. It is an excellent place to get a feel for the rough-and-tumble of real estate as well as to learn about new developments or conversions of older buildings.

The site’s founder, Lockhart Steele, moved to New York in 1996 after graduating from Brown University. To find his first apartment, he like everyone else searched through printed listing guides and newspaper classifieds, a process that he said now seems “outlandish and bizarre.”

Mr. Steele says that although apartment-hunting remains arduous, the Web makes it easier to understand what you are getting yourself into. Now, he says, “there’s so much information, the trouble is trying to decide which sources to abide by.”

He began Curbed in 2004 and has expanded it to other major cities and a nationwide report.

For practical advice, BrickUnderground, started by Teri Karush Rogers, a veteran real estate journalist, has information about current prices, and more generally, the lowdown on apartment living in New York.

The site has a link to “Survival Kits” for renters. The topics include tips for finding a no-fee apartment, the seven worst places to live in a building and the perfect letter of recommendation for a landlord. There is also a series of columns called “Rental Rookie,” written by a woman who recently moved to New York from Los Angeles.

New York has almost 300 neighborhoods, and for newcomers, an important early step is winnowing them to those that suit their lifestyles, transportation needs and price ranges.

HotPads, introduced in 2005 after the founders became frustrated by their own postgraduate apartment searches, has 55,000 active apartment listings in New York, all plotted on a map. It also has a tools to help narrow the hunt.

One of those tools, “HotSpots,” allows you to get a general sense of whether you can afford a particular neighborhood, overlaying dots of different colors on a map to show listings and their price per bedroom. Using this tool, it is easy to see at a glance that a bedroom in the West Village, for example, often rents for more than $2,500 a month, while a bedroom in Bedford-Stuyvesant in Brooklyn will set you back less than $1,500.

The site’s “Lasso” tool also comes in handy. It allows users to draw a circle around an area, say a four-block radius around a subway stop, or parts of two different neighborhoods. These searches, like others on the site, can be saved, and users can sign up to receive e-mails when apartments in those areas become available.

But there is much more to a neighborhood than its per-capita income and subway stops. Each has its own identity and flavor. A site called NabeWise ranks neighborhoods based on various characteristics.

Say you want to live in Brooklyn and your wish list is: good public transportation, a neighborhood that’s quiet but trendy, and rents on the lower end of the price scale. After selecting those attributes, NabeWise shows you a map of the borough with the five neighborhoods that best meet your criteria, with South Williamsburg and Greenwood Heights as the top options.

The site encourages users to fill in information about neighborhoods, but as the site started just last year, there has been little participation so far. Nevertheless, the rankings are useful shorthand.

Once the search is down to a couple of neighborhoods, it’s time to look at the apartment stock. HotPads can help with this, as can sites like Naked Apartments and RentHop. These provide multiple ways to narrow preferences, including no-fee apartments and pet-friendly places, and include listings from a variety of landlords and rental companies.

The New York Times’s Web site,, has rental listings, as well as recent and archived news articles. StreetEasy has searchable listings and an active user forum, though discussions tilt toward sales.

For pure listings, Craigslist has a wide variety, many placed by small landlords or roommate-seekers. As with any site, it is best to proceed with caution. An appealing listing may be bait: you call, a broker answers, and guess what! The apartment is rented, but lucky for you, a similar one, for a higher price, is available. Or it could lead to something worse. Craigslist has prominent links to tips for avoiding scams, and apartment-hunters should familiarize themselves with them.

“I know many people who have had success with Craigslist,” said Alicia Schwartz, a former broker who recently introduced, a site that gives apartment buildings numerical scores based on their value, amenities and other factors. “But people need to be aware of how the market works and going prices.”

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