accountability failures September 30, 2012
Posted by Bradley in : consumers , 1 comment so farIf we ever do get a treadmill from Sears after the weeks of waiting, getting up early to wait some more, being woken up early just to be reminded that we are still waiting, it’s pretty likely that we will get another robocall asking us how the delivery went (unless it is easier for Sears folk to disable follow-up calls than reminder calls that tell us we’re still waiting). And here is what is to me the worst part of all this. The people we can manage to speak to are limited by the scripts they are required to follow – they have almost no agency in any of this by design. The only people we may be asked to evaluate in any of this are the people who perform the scripts and not the people who write them. The people without power are made accountable rather than the people with power. But if you only choose to ask customers how they were treated by the script-followers you won’t get real feedback about the consumer experience. The systems may be designed that way on purpose, but if that is so it’s a pretty sad state of affairs.
how to facilitate international co-ordination of financial regulation September 29, 2012
Posted by Bradley in : financial regulation , add a commentFrom a recent speech by Robert Jenkins of the Bank of England’s Financial Policy Committee with the title A debate framed by fallacies:
global regulators would have less to argue about if there were fewer rules to coordinate and fewer regulations to enforce.
bba libor announcement September 25, 2012
Posted by Bradley in : financial regulation , add a commentToday the BBA announced:
The BBA seeks to work with the Wheatley review team as they complete their consultation on the future of LIBOR. If Mr Wheatley’s recommendations include a change of responsibility for LIBOR, the BBA will support that.
Press stories seem to assume that the BBA will be walking away. I am not sure what this would do for all of the transactions where the documentation refers to “BBA Libor” or “British Bankers Association Libor” (such as this one).
transparency defects can harm people September 22, 2012
Posted by Bradley in : transparency , add a commentI did everything a doctor is supposed to do. I read all the papers, I critically appraised them, I understood them, I discussed them with the patient and we made a decision together, based on the evidence. In the published data, reboxetine was a safe and effective drug. In reality, it was no better than a sugar pill and, worse, it does more harm than good. As a doctor, I did something that, on the balance of all the evidence, harmed my patient, simply because unflattering data was left unpublished.
imagining better transparency September 21, 2012
Posted by Bradley in : transparency , add a commentCorporate Europe Observatory critiques the EU’s policy processes in this video.
The video focuses on participation in expert groups, but there’s an imbalance in participation in later consultations also. Comments to the European Parliament’s consultation on market manipulation : lessons and reform post LIBOR/EURIBOR have been published here. As usual there are a large number of comments from trade associations and a small number from groups representing consumers.
There are some transparency issues (defects) with respect to the publication of these responses. There are three anonymous submissions. Although the GFMA seems to have tried to contribute to this consultation with its global principles document, which was addressed to Arlene McCarthy, the Committee’s rapporteur among others, and AFME clearly thinks the GFMA document was responsive to this consultation, the GFMA document does not appear in the list of comments. Also, the response of the Association of Foreign Banks states in answer to a number of the consultation questions “Please see our response to the UK Wheatley Review of LIBOR: initial discussion paper.” Presumably this was provided to the Committee, but it is not on the consultation page and is not accessible from the AFB’s website (which is generally opaque to non-members), or from the Wheatley Review web page which does not (yet?) show the comments made to that Review.
From the perspective of public transparency this isn’t ideal. In some ways I do have a preference for consultations where the full responses are published (if in fact they are), but this method of providing access to the comments does require a lot of time to wade through the responses. And this is made worse by the fact that some of the responses contain padding , are not precisely geared to this consultation (for example the response from Transparency International, although it does have some good stuff in it) or are designed not so much to provide information useful for the consultation as to create a good impression – pr rather than policy. But the fact of providing online access to comments does suggest that much more could be done. The consultation could link to the Transparency Register, and, in turn that Register could link to all representations the registered entities have made to EU institutions.
eesc on tax havens September 20, 2012
Posted by Bradley in : governance , add a commentI have been reading some of the Economic and Social Committee’s opinions, and am very struck by the tough tone of a recent opinion on tax havens (Joe Biden gets a special mention in the context of the opinion’s description of Delaware as a tax haven), published in the Official Journal at the end of July. Here’s a brief excerpt:
There are reasonable grounds for stating that the financial crisis has been driven in part by complex and opaque transactions carried out by financial operators domiciled in jurisdictions that maintain financial secrecy, causing serious loss for investors and the purchasers of such financial products. Tax havens host off-balance sheet transactions by financial institutions, as well as complex financial products that have contributed nothing to innovation in the financial sector, but generate financial instability. There is clear evidence that much foreign direct investment, especially in developing countries, comes from tax havens.
financial regulation developments September 19, 2012
Posted by Bradley in : financial regulation , add a commentThe UK Treasury is now consulting on the financial policy committee.
Today, Andrea Enria, Chair of the EBA, speaking to the EU Parliament’s Committee on Economic and Monetary Affairs, commented on the Banking Union proposals, saying the they will require a single rulebook for the EU and “a leap towards truly unified supervisory methodologies” to avoid a polarisation between the euro area and the rest. She also promised that the EBA will be working on consumer issues. Steven Maijur of ESMA also updated the Committee on ESMA’s work. EIOPA does not yet seem to have published its submission on its web page.
Next Monday the Committee on Economic and Monetary Affairs will hold a hearing with the title: “Tackling the culture of market manipulation – Global action post Libor/Euribor” (Gary Gensler will participate).
Update: here is the EIOPA statement.
hector sants letter about fsa, diamond and barclays September 19, 2012
Posted by Bradley in : financial regulation , add a commentWhen the Treasury Select Committee published its preliminary report into Libor last month, Hector Sants wrote a letter to Andrew Tyrie stating that when the FSA approved Diamond’s appointment it did so having considered the fact and implications of the Libor investigation. Today, about a month after the letter was written, the Committee published the letter, a file note supporting the contents of the letter, and Andrew Tyrie’s response. As the Telegraph notes, Tyrie’s response points out that the Sants letter, supported by the file note, contrasts with statements Marcus Agius made to the Committee.
questions about ensuring financial stability September 15, 2012
Posted by Bradley in : financial regulation , add a commentThe GAO raises a number of questions about the effectiveness and accountability of the Financial Stability Oversight Council (FSOC) and Office of Financial Research (OFR) in a report published this week. The report makes a number of observations about transparency gaps in this structure. Financial stability is a context in which the relationship between transparency and policy seems to me to be complicated. The GAO would like to see more transparency, noting in its conslusions:
both FSOC and OFR could be more transparent. For example, FSOC’s minutes contain limited details about the council’s discussion and the amount of detail included in the minutes has declined over time. While some information discussed must remain confidential given potential market sensitivities, legal restrictions on sharing certain information, and the need for members to deliberate, striving to be as transparent as possible given the potential impact of some of its decisions on institutions and markets is important for FSOC. FSOC’s and OFR’s limited transparency has caused some former government officials, industry representatives, and academics to question whether they are making progress. Continued efforts to increase transparency will allow the public and Congress to better understand FSOC’s and OFR’s decision making, activities, and progress.
The report does suggest that the US arrangements for financial stability may be less skewed towards the views of central bankers than those in the EU:
although the United Kingdom (UK) and the European Union (EU) have established or are in the process of establishing councils to oversee systemic risk, in the UK and the EU the central bank has more members or more votes than other entities on these councils. In contrast, in the United States, the central bank-the Federal Reserve-has one member on FSOC and one vote among the 10 voting members. FSOC policy staff and staff at member agencies noted that the diverse perspectives of FSOC members enrich FSOC deliberations.
Whether or not bodies with responsibilities for financial stability would be better served by more or fewer central bankers is an interesting question. But it’s worth noticing in this context that some central bankers are thinking in complicated ways about regulation – and not just focusing on banks. I’m thinking about Andy Haldane in particular (for example this recent speech about the downsides to complexity in financial regulation – titled The Dog and the Frisbee).
iosco on libor September 14, 2012
Posted by Bradley in : financial regulation , add a commentIOSCO has announced the establishment of a “Board Level Task Force on Financial Market Benchmarks” to be co-chaired by Martin Wheatley of the FSA (responsible for the UK’s Wheatley Review) and Gary Gensler of the CFTC. You can tell this is an important (Board Level) Task Force because all of its members are men.
The press notice states that:
Other international organizations and national regulators, such as the European Commission, UK Treasury, (Wheatley Review), Central Bank Governors of the Bank for International Settlement and the Global Financial Market Association, are also undertaking work on the benchmark issue.
The inclusion of the GFMA in this list of “international organizations and national regulators” seems a bit odd to me even though GFMA published a set of principles for financial market benchmarks a week ago. Much of the GFMA principles document is rather content free – a lot of high-minded language but not much apparent bite. The possible exception to this is the combination of record-keeping and independent review requirements for, among other matters, the calculation of the benchmark. If proper records were kept, and were discoverable in litigation, it would make it easier to figure out where any liability for rigging might lie. And this fact might discourage rigging. But although there’s not a whole lot of detailed substance to the principles there isn’t any less than you find in most transnational standards documents. The oddity is really in including the GFMA in this list as it’s not a national regulator, or an international organization in the same way that IOSCO and the Basel Committee are. It’s a private sector group. And given the failures in Libor etc seem to me mostly to have been failures of the private sector, including failures of governance at the BBA and in banks, that is a bit strange. On the other hand, given the recent focus on the culture of financial firms, the GFMA has a real incentive to be seen to care about standards.