financial services consumers panel recommends changes to uk financial services bill July 19, 2012
Posted by Bradley in : consumers, financial regulation , add a commentIn a press release yesterday the FSCP argued that Legislators must force cultural change in financial services. The FSCP Briefing on the Financial Services Bill states:
The key changes the Consumer Panel would like to see are:
– a duty of care for those providing financial services;
– a requirement for the Prudential Regulation Authority (PRA) to take into account the views of consumers by responding to representations from the Consumer Panel;
– a requirement of access for all consumers to financial services;
– an increase in the transparency of financial services regulation by empowering the PRA and Financial Conduct Authority (FCA) to disclose information about the financial services firms they regulate;
– effective competition powers for the FCA to allow it to deliver its statutory objectives; and
– a requirement for the regulators to undertake full and robust cost benefit analysis when developing new rules
another non-profit voting scheme requires facebook (or stayclassy) account July 17, 2012
Posted by Bradley in : life , 1 comment so farAt the end of last month it was Mission:Small Business, now the Classy Awards will only accept votes from people with facebook or Stayclassy accounts.
parliamentary commission on banking standards appointed July 17, 2012
Posted by Bradley in : financial regulation , add a commenta joint Committee appointed by the House of Commons and the House of Lords to consider and report on: professional standards and culture of the UK banking sector, taking account of regulatory and competition investigations into the LIBOR rate-setting process.. lessons to be learned about corporate governance, transparency and conflicts of interest, and their implications for regulation and for Government policy
The members of the committee are Andrew Tyrie, Chairman, Mark Garnier, Andy Love, Pat McFadden, John Thurso, Lord Turnbull, Baroness Kramer, Lord Lawson, Lord McFall, and the Bishop of Durham.
financial stability and libor July 17, 2012
Posted by Bradley in : financial regulation , add a commentThe Treasury Committee, meeting today to discuss the Bank of England’s June 2012 Financial Stability Report began by picking up where they left off yesterday with Turner asking why King was involved in the discussions with Agius about Diamond’s position at Barclays. Andrew Tyrie asked why, when the FSA was the regulator, the Bank of England was involved. Turner insisted on the legitimacy of the Bank of England’s concern with confidence in banks given the Bank’s role in providing liquidity support to banks. And he said the FSA was not taking the position as the regulator that Diamond was not fit and proper (it was not a formal direction). Tyrie expressed some concern for the future that the position of chief executives of banks should not hang on the whim of some future Governor of the Bank of England.
On the issue about whether the Bank encouraged lowering of Libor quotes, there are some newly released emails. And Tucker was in the hot seat over this issue again.
When central bankers meet at Basel every couple of months there is a smaller group of major countries that meets, King says, in the context of questions about his interactions with Geithner over Libor governance.
Meanwhile there are news stories about other competitors to Libor based on actual transactions, for example the DTCC GCF Repo Index and AFMA’s bank bill swap reference rates. Ben Bernanke, giving evidence to the Senate Committee on Banking, Housing and Urban Affairs, commented unfavourably on the lack of responsiveness of Libor to the US suggestions for governance changes and suggested that transaction based measures of interest rates were preferable.
transparency and financial regulation July 16, 2012
Posted by Bradley in : consultation , add a commentIn early May I noted that the High-level Expert Group on Reforming the structure of the EU banking sector was running a consultation. The web page for the consultation suggests that there were no responses to the invitation to comment. Perhaps the consultation wasn’t well advertised? Perhaps the questions were too open ended?
uk libor hearings July 16, 2012
Posted by Bradley in : financial regulation , add a commentAt the Treasury Select Committee Jerry del Missier appeared. Neither del Missier nor the Committee seemed on top form here. They went round and round – committee members tried to get him to make damaging admissions, and what they got was mostly that he didn’t know what was going on.
Then the FSA team: Turner, Bailey, McDermott. Bailey and Turner seem pretty clear that Diamond’s evidence to the Committee gave a not very accurate impression of Bailey’s visit to Barclays and the Turner letter. Turner said that his letter was the only letter he had sent of this type as Chairman of the FSA. Barclays was a problem in terms of its attitude to regulation. The Committee members were competing with each other over how critical to be about the FSA and its response to the Libor fixing issues, with a number of references to ordinary people and what they would think about the whole thing.
geithner to king re: libor July 13, 2012
Posted by Bradley in : financial regulation , add a commentThe Bank of England published communications between Geithner and King in May 2008 with respect to ideas for changes to the BBA governance arrangements. That the then President of the Federal Reserve Bank of New York should be seeking to affect the way in which Libor is calculated is odd, given the origins of US dollar Libor as an offshore rate. US dollar Libor developed to avoid interest rate controls in the US. Of course, by 2008 Libor had become standardized and had moved back into the US as a rate of interest used in domestic US transactions, so the history wasn’t so relevant. Still, the idea of federal reserve/central bankers in the UK and US co-operating over the governance of Libor is interesting.
As to what Geithner proposed, as well as some sensible-seeming governance suggestions, for example that Bank auditors be expected to attest to the accuracy of banks’ Libor rates, and an idea of establishing random sampling of rates submitted by an expanded set of contributor banks to minimize misreporting, there are some other rather different suggestions. For example, Geithner says that more US banks should be involved in Libor fixing (and this would surely help improve the profile of these banks). He also suggests a second fixing after the US markets open because this would be more indicative of conditions while the US market was open. But Libor was supposed to reflect rates in London and not in New York. Now, it is true that whereas in the early days there were divergences between Libor and domestic US rates, over time there was a convergence. But what to make of this? To force greater convergence or not? I find the combination of these suggestions (with King’s response that the Bank of England would ask the BBA to include them in its consultation document) with the language early in the Geithner memo about enhancing “perceptions of the BBA as an objective intermediary in the rate-setting process” to be rather odd. Was the BBA to be the Fed’s poodle or an objective intermediary? Was Libor to be a rate derived from the market or one managed by central banks?
The New York Fed also released documents this morning for the forthcoming Congressional hearings into Libor. These documents raise one question which doesn’t really feature (yet) in all of the inquiries and investigations into what happened, and that is why, given that it looks as though there really wasn’t an effective interbank market frequently during the crisis, no-one seems to have thought to recognise that fact. After all, documentation for Libor-based transactions has contained language providing for what happens if there is no Libor since inception.
So now back to the Geithner memo. How can a mechanism to feed US market based rates into Libor fixing be a solution to a problem that Libor does not in fact reflect what it purports to reflect which is rates in the London interbank market? There seems to me to be a transparency issue here.
uk to review competences of eu July 12, 2012
Posted by Bradley in : eu , add a commentWilliam Hague announced the review (and there’s a more detailed paper on the review here), stating:
The end result will be the most thorough and detailed analysis possible of what the exercise of the EU’s powers does and what it means for the United Kingdom. The review will present the evidence and analysis, and of course it will be for political parties to decide on their own policy recommendations. Such a comprehensive piece of work has never been undertaken before, but it is long overdue. It will ensure that our national debate is grounded in knowledge of the facts and it will be a valuable aid for policy makers in the future.
But the time frame is rather long – the review is to conclude some time in 2014.
libor and the treasury select committee: next steps July 11, 2012
Posted by Bradley in : financial regulation , add a commentNext Monday the Committee will hear from Jerry del Missier, Adair Turner, Andrew Bailey and Tracey McDermott.
financial services lobbying July 10, 2012
Posted by Bradley in : financial regulation, lobbying , add a commentThe Bureau of Investigative Journalism has published a number of articles about lobbying in the financial services context including this one about the FSA’s meetings with trade groups (and here’s the link to the story at the Guardian) which refers to minutes of meetings (which I would love to see). But of course these meetings happened in a context where politicians were telling regulators not to over-regulate, and not to gold-plate EU measures. The directive not to over-regulate came from the same place as Agius’ comments about the competitive international context in which Barclays operates, and trade associations have been dedicating huge amounts of effort for years not just to meeting with politicians and regulators but to developing sophisticated rhetorical and even theoretical arguments to support what they want from regulation. I remember one announcement for an FSA conference which explicitly stated that it would provide an opportunity for regulated firms to interact with their regulator. And, in December 2008 I asked:
whether it is really possible to have effective representation of consumer interests in a structure where the consumer representation is funded by a regulator which is committed to not frightening regulated firms too badly.
On some issues we seem to have moved on a bit from this point. But as to the larger question of how we develop policy in an environment with appropriate levels of scepticism about the arguments financial firms make about regulation, I am not at all sure. And by appropriate levels here I am concerned not only with the risk that regulation may be too lax but also that sometimes it may be too restrictive.