iif statement October 21, 2007
Posted by Bradley in : Uncategorized , comments closedToday the Institute of International Finance made an announcement:
..the IIF’s Board of Directors is launching a major initiative to refine best practices for market participants. Our Board brings together leaders of some of the largest financial institutions from across the globe who are committed to this initiative.
The Board is establishing a committee to produce recommendations by the Spring of 2008 that reflect the views of leaders of our industry and that can enjoy strong support from financial services firms across the world and that complement efforts underway by the official community.
The committee’s agenda will concern a variety of key aspects of important issues, including those relating to structured products, comprising:
* Risk management, credit underwriting practices, and pricing of risks;
* Conduits and the contingent liquidity risks that firms have been exposed to by using off-balance sheet instruments;
* Valuation questions, especially where markets are thin or absent;
* Ratings — interpreting and evaluating them; and,
* Transparency, disclosure and communications to define appropriate standards.
get smart about credit day October 18, 2007
Posted by Bradley in : Uncategorized , comments closedToday is Get Smart about Credit Day. The American Bankers Association and the US Treasury teamed up to provide financial education together:
U.S. Treasury Department officials and bankers across the country will team up Thursday to promote wise credit habits for U.S. teens as part of the American Bankers Association Education Foundation’s annual Get Smart About Credit Day. Students will participate in lessons on the responsible use of credit and the importance of a positive credit history, as Treasury officials and staff travel to schools nationwide to teach classes with local bankers.
us banks provide liquidity support October 15, 2007
Posted by Bradley in : Uncategorized , comments closedIn the US, and encouraged by the Treasury,banks have agreed to provide liquidity in the market for asset backed commercial paper:
Bank of America Corp. (NYSE: BAC), Citigroup Inc. (NYSE: C), JPMorgan Chase & Co. (NYSE: JPM) and several other financial institutions have reached an agreement in principle to create a single master liquidity enhancement conduit (“M-LEC”). Once established, M-LEC will agree, for a set period of time, to purchase qualifying highly-rated assets from certain existing SIVs that choose, in their sole discretion, to take advantage of this new source of liquidity. Access to such liquidity is intended to allow participating sellers to meet pending redemptions and facilitate asset-backed commercial paper rollovers.
northern rock to virgin money? October 13, 2007
Posted by Bradley in : Uncategorized , comments closedRichard Branson’s Virgin wants Northern Rock. Sounds painful.
fighting scams October 12, 2007
Posted by Bradley in : Uncategorized , comments closedRegulators sometimes try to fight scams using similar techniques to the scamsters. This week’s example involves OFT scambusters and trading standards officers hanging around airports trying to protect travellers against holiday club scams:
After spending thousands of pounds, consumers often find they have bought little more than access to an internet booking service offering no more than they could get at any high street travel agent. To fight back against the scammers, the OFT will hand out thousands of fake holiday club scratchcards at Glasgow, Manchester, Luton and Bristol airports in October. The card, which asks ‘have you won a luxury holiday?’, is scratched off to reveal three ‘winning’ matching symbols whilst a second strip, revealing the prize, explains the consumer has in fact ‘won a trip to a lengthy sales presentation and a chance to pay thousands of pounds for membership to a bogus holiday club’.
Another, older, example is the SEC’s use of fake web sites, such as the McWhortle web site.
uk banking reform October 11, 2007
Posted by Bradley in : Uncategorized , comments closedThe UK Government published a discussion paper on banking reform and the Guardian reports:
“A new regime is needed so that depositors are insulated from a bank that fails,” said the chancellor, who also revealed that he and his wife have a Northern Rock mortgage.
Today’s Hansard quotes the Chancellor as follows:
With permission, Mr. Speaker, I should like to make a statement on Northern Rock plc. Before I start, however, I draw the House’s attention to the fact that I have informed both the Register of Members’ Interests and the Treasury’s permanent secretary that, like many others, my wife and I have a mortgage with Northern Rock, but no savings or deposits.
12.10.07: The Chancellor’s statement can be found here.
financial regulation and road safety October 9, 2007
Posted by Bradley in : Uncategorized , comments closedClaudio E. V. Borio in a BIS working paper analogises strategies for dealing with financial stability to strategies for ensuring road safety suggesting a need to focus on speed limits as well as buffers.
more northern rock October 9, 2007
Posted by Bradley in : Uncategorized , comments closedToday the UK Treasury, FSA and Bank of England announced:
HM Treasury, on behalf of the Tripartite Authorities, can today confirm that the guarantee arrangements previously announced to protect existing depositors of Northern Rock plc will be extended to all new retail deposits made after 19 September, including those made from today. These arrangements will cover all retail deposits, including future interest payments, movements of funds between accounts and term deposits for the duration of their term.
New Northern Rock depositors appear to be in a better position than depositors in other institutions (now protected up to £35,000). The announcement states that Northern Rock will pay a fee for this arrangement so that it will not receive a commercial advantage over other institutions, but there are no details. The general approach is to say that regulation cannot and should not prevent firms from failing. See, for example this statement from the FSA’s annual report for 2006-7:
We accept that we cannot achieve, and that it would be counterproductive to pursue, a zero-failure approach. Investment involves risk, and risk entails occasional failure.
Except when it doesn’t.
The FSA published a memorandum to the Treasury Select Committee in which it acknowledges its failure to predict in advance the dramatic deterioration in market conditions which precipitated Northern Rock’s crisis. And the FSA recognises the need for more discussion about depositor and investor protection.
The [Financial Services Compensation Scheme]’s main function is consumer protection: it provides consumers with a measure of compensation in the event of failure of an institution in the financial sector. The existence of a compensation scheme helps to reduce the systemic risk that a single failure of a financial firm may trigger a wider loss of confidence. But while it contributes to encouraging consumer confidence in the markets, the FSCS was not designed, on its own, to be able to deal with all potential failures of financial firms, nor to be a crisis management tool in the event of a largescale failure.
So is Northern Rock an exceptional case, a situation where stepping in now to support confidence can protect other firms, or is it something more?
entrepreneurship and business failure October 8, 2007
Posted by Bradley in : Uncategorized , comments closedThe EU Commission has published a communication on overcoming the stigma of business failure along with beginning a media campaign to reinforce the idea that providing a second chance after business failure promotes entrepreneurship. One of the images is of a perplexed looking baby. The idea seems to be that babies have to get up all the time after falling down, but this one seems to be rather mystified about the whole thing:
deposit protection in the uk – new rules October 2, 2007
Posted by Bradley in : Uncategorized , comments closedThe FSA announced yesterday its new deposit protection rules under which depositors will receive 100% of the first £35,000.