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what's in a name? April 30, 2009

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In deference to the fine sensibilities of pig farmers, the EU isn’t calling the current virus “swine flu”, but rather “novel flu”. Apparently they are not so worried about the feelings of authors and publishers (and in any case, in other languages this doesn’t work – in French the illness is being called un nouveau virus de la grippe).
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experimental formatting of equality bill April 29, 2009

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This week the UK government published a huge Equality Bill and did so in a new format: if you use the pdf version you can see the explanatory notes and bill text on facing pages, rather than having to read the two documents separately. There’s an html version which is easier to read: setting the pdf reader to to see two pages side by side means the text is tiny on my monitor, and in trying to align the bill text and explanations they had to include a lot of empty space in the printed text. But the cost of the html version is you have to click around a lot – it is divided up into small chunks- and this is a bit irritating. Even though I ‘m pretty wedded to pdf format documents as a general rule, I think it is easiest to read the “interwoven” html version. But the drafting is very, very complicated – it’s not particularly user friendly in that respect.

cebs remuneration principles April 20, 2009

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The CEBS published its High Level Principles for Remuneration Policies today. I wish some group would publish some low-level principles for a change – there’s something awfully general – even meaningless – about these very general principles (although I’m not entirely sure of the wisdom of trying to regulate remuneration either). The CEBS received 12 comments on the consultation paper, and these are available on its website. Responses were mostly from financial trade associations (although the Danish Shareholders Association and UNI Europa Finance also responded). The Italian Banking Association argued, for example, that the CEBS should conform its principles to international standards so as not to put European firms at a competitive disadvantage. The BBA suggested that using the word clawback wasn’t helpful because it isn’t a helpful legal term in some jurisdictions. But given that the document only seems to have been published in English I’m not sure it was ever meant to be used as a legal term as the laws of most of the EU countries aren’t written in English to begin with. But this is financial regulation, and we do that in English – even in a multilingual union. I do wish the Basel Committee would approach consultation – and transparency about the results of consultation more like this.

basel committee consultations April 16, 2009

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Yesterday the Basel Committee published Supervisory guidance for assessing banks’ financial instrument fair value practices. The announcement notes that “A consultative version of this paper was released in November 2008.” Although the consultative document invited comments by February 6, 2009, neither the paper nor the announcement stated where any comments should be sent (the CEBS, in contrast, provides an email address for the submission of comments on its documents). I suppose that if you are the sort of person whose comments the Basel Committee is interested in hearing from you knew whom to contact. And although there are some changes between the consultative and final versions (there’s a more detailed discussion of governance structures and control processes) there is no explanation in the final version about whether the changes resulted from comments or not. We are not told how many comments the Committee received, or from whom, or what the commentators said. This is clearly at the opaque end of the transnational standard-setting spectrum.

fighting stress in the uk and in miami April 15, 2009

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The BBC and the Miami Herald both addressed the issue of how to fight stress this week. The proposed solutions aren’t exactly the same. Top of the BBC’s list are lightboxes – which we don’t need in Miami!
The BBC’s list: lightboxes, get out in the garden, get yourself out of breath, cook a meal from scratch, stroke a cat, pat yourself on the back, take up a lifetime hobby, do something for someone else…for free, seek intimacy and good things take time. The Miami Herald: exercise, positive thinking, hypnosis, massage, tai chi, yoga, laughter, music, meditation, biofeedback, make a friend, acupuncture and get going. There are some similarities here: both lists suggest exercise and positive thinking , for example. But whereas the Miami list is largely focused on what the stressed out person can do for herself, the BBC’s list encourages more looking outwards. Even stroking a cat is presented as being a good thing partly because it involves giving: “in a way we reward ourselves by being nice”. Nowhere does the Miami list suggest that being nice to others or volunteering can help you fight stress. I’m probably culturally conditioned to prefer the BBC’s approach, but it does seem more appealing.

uk consultation on consumer credit directive April 14, 2009

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The UK’s Department for Business, Enterprise and Regulatory Reform today published a consultation document on implementation of the consumer credit directive. Although the directive was adopted nearly a year ago (and so one might have thought there could have been an earlier publication of the consultation document), the consultation period is to be 8 weeks long rather than the usual 12 weeks because of the need to give lenders as much time as possible to comply with the new rules.

There’s a long and detailed discussion of how to implement the requirement (in Art. 5(6) of the directive) that:

Member States shall ensure that creditors and, where applicable, credit intermediaries provide adequate explanations to the consumer, in order to place the consumer in a position enabling him to assess whether the proposed credit agreement is adapted to his needs and to his financial situation, where appropriate by explaining the pre-contractual information to be provided in accordance with paragraph 1, the essential characteristics of the products proposed and the specific effects they may have on the consumer, including the consequences of default in payment by the consumer. Member States may adapt the manner by which and the extent to which such assistance is given, as well as by whom it is given, to the particular circumstances of the situation in which the credit agreement is offered, the person to whom it is offered and the type of credit offered.

The consultation document suggests that at one extreme UK rules could implement this requirement by leaving it up to the consumer to decide whether explanations were adequate while at the other extreme the responsibility to ensure suitability could be imposed on the lender. I’m not at all sure that the description of a minimal solution would comply with the requirements of the directive, but what is proposed is somewhere on the middle, although with a suggestion that customers might be able to opt out of lengthy explanations.

A similar choice between minimal and maximal implementation is offered with respect to the obligation under Art. 8 to assess the consumer’s creditworthiness. The consultation document proposes to set different requirements for different lending contexts.

With respect to both issues there’s a sense that the drafters of the document wanted to present the minimal and maximal strategies as the worst possible outcomes (from different perspectives) so that the compromises suggested look more reasonable from either perspective than they otherwise would.

borrowing in supranational standard setting April 9, 2009

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Years ago I was told by the editors of an academic journal that I couldn’t write in an academic article that the EU’s harmonized rules on financial regulation might be looked to as a model (not the model, just a model) for the development of international standards (an external reviewer had a problem with the argument). So, when I see things like this I feel a little bit vindicated. The FSF Principles for Cross-border Cooperation on Crisis Management state:

In preparing for financial crises, authorities will … Develop common support tools for managing a cross-border financial crisis, including: these principles; a key data list; a common language for assessing systemic implications (drawing on those developed by the EU and by national authorities); a document that authorities can draw on when considering together the specific issues that may arise in handling severe stress at specific firms; and an experience library, which pools key lessons from different crises.

supranational standards, transparency, etc…. April 9, 2009

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I have signed up for email alerts with the BIS, but for some reason, although the FSF (now Financial Stability Board (will they change the domain name?)) publishes its press releases via the BIS website, they don’t seem to make it to the email alerts, nor are they seeming to appear on the BIS website front page. You have to sign up separately to get the FSB email alerts. None of this seems to be organized to make it easy to see what is going on – you have to be quite committed to keep track. And if you’re interested in EU action on banking you have to look at what the the CEBS is doing too.

Meanwhile, I’m watching the ways in which some of the developing principles are being presented. Reading the Basel Committee/IADI’s “Consultative Document” on Core Principles for Effective Deposit Insurance Systems I am very struck by the lack of requests for reactions in the document, or even any indication as to where comments could be sent. Why call a document a consultative document if it really isn’t?

On the other hand, the IMF, in seeking views about its transparency policy wants to control the responses it gets. Commentators must categorize themselves as civil society organizations, financial markets participants or “think tanks, academics and other stakeholders” – and the questionnaires are different for the different groups. For example, whereas civil society organizations and the think tanks group are asked their views about whether IMF transparency should be improved by making reports easier to understand, more timely, more frank, or easier to access, the financial markets participants are not asked this question. Because they don’t care? Because the IMF doesn’t care what their views are on this question? Because they might be offended at a suggestion that the IMF’s reports are too hard to understand?