The Financial Regulation Forum

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State capitalism is a viable alternative to liberal capitalism

The Economist Debate: This house believes that state capitalism is a viable alternative to liberal capitalism. The moderator’s, Adrian Wooldridge, rebuttal remarks. I’m writing my contribution to this debate from Davos, where, I’m intrigued to note, state capitalism is well represented, despite the low profile of the Chinese delegation. I received a free copy of [...]

Featured Posts

Accountability of the Bank of England

Response from the Court of the Bank of England to the recommendations made by the Treasury Committee and Joint Committee on the draft financial services bill on the accountability of the Bank of England. On 8 November 2011, the Treasury Select Committee of the House of Commons published a Report on the “Accountability of the [...]

Basel III liquidity standard and oversight

Basel III liquidity standard and strategy for assessing implementation of standards endorsed by Group of Governors and Heads of Supervision. The Group of Governors and Heads of Supervision (GHOS), the oversight body of the Basel Committee on Banking Supervision, met on 8 January 2012. The main items of discussion were the Basel Committee’s proposals on [...]

E-learning interactive graphic: Basel III

International regulatory framework for banks (Basel III). What is Basel III? Around the world, central bankers, regulators and governments have responded to the financial crisis with new regulation and legislation. The cornerstone of this global initiative to contain risk is Basel III – sweeping new regulatory standards for banks on capital adequacy and liquidity. Basel [...]

Snippets

• 03 Feb. S.E.C. Is Avoiding Tough Sanctions for Large Banks. Even as the Securities and Exchange Commission has stepped up its investigations of Wall Street in the last decade, the agency has repeatedly allowed the biggest firms to avoid punishments specifically meant to apply to fraud cases. By granting exemptions to laws and regulations that act as a deterrent to securities fraud, the S.E.C. has let financial giants like JPMorganChase, Goldman Sachs and Bank of America continue to have advantages reserved for the most dependable companies, making it easier for them to raise money from investors, for example, and to avoid liability from lawsuits if their financial forecasts turn out to be wrong. An analysis by The New York Times of S.E.C. investigations over the last decade found nearly 350 instances where the agency has given big Wall Street institutions and other financial companies a pass on those or other sanctions. Those instances also include waivers permitting firms to underwrite certain stock and bond sales and manage mutual fund portfolios. (more...) #
• 31 Jan. Shanghai to be global yuan trading centre. Reuters Beijing and Shanghai China will make Shanghai the global centre of yuan trading, clearing and pricing by 2015, according to a specific state plan laying out the city’s future as an international financial centre. The detailed plan, published jointly by the country’s economic planning agency and the Shanghai government, shows the scale of China’s ambition in creating its own version of New York, London or Hong Kong. China is aiming to transform Shanghai into an international financial centre by 2020 and analysts said yesterday’s blueprint was probably a part of that longer-term scheme. Currency traders said the statement by the National Development and Reform Commission (NDRC) was also a message from Beijing that the yuan’s movements, which have increasingly been influenced by the offshore market in recent months, would be decided by the government. (more...) #
• 26 Jan. Fed Signals That a Full Recovery Is Years Away. The Federal Reserve, declaring that the economy would need help for years to come, said Wednesday it would extend by 18 months the period that it plans to hold down interest rates in an effort to spur growth. The Fed said that it now planned to keep short-term interest rates near zero until late 2014, continuing the transformation of a policy that began as shock therapy in the winter of 2008 into a six-year campaign to increase spending by rewarding borrowers and punishing savers. (more...) #
• 26 Jan. President Obama called on Congress Tuesday to toughen laws against securities fraud and to strengthen the ability of the Securities and Exchange Commission to punish Wall Street firms that repeatedly violate antifraud statutes. In his State of the Union address, Mr. Obama also said he would ask the attorney general to establish a special financial crimes unit to prosecute cases of large-scale financial fraud. It is not clear how that effort would differ from the Financial Fraud Enforcement Task Force, a cross-agency group that Mr. Obama established in November 2009. Its mission, as the White House put it then, was to “hold accountable those who helped bring about the last financial crisis and to prevent another crisis from happening.” (more...) #
• 24 Jan. MPs reject Bank of England’s governance plan. Parliament’s Treasury committee faces a potential showdown with the government after a report to be released on Monday rejects much of the Bank of England’s plan for its own governance. (see earlier post) The committee says the plans do not deliver the accountability required by the public interest. The Bank had urged that its Court of Overseers be maintained and that only the processes by which decisions are made should be open to review. It also said its policies should not be subject to scrutiny, a position the Treasury is leaning towards endorsing. (more...) #
• 24 Jan. Rising outcry over executive pay in UK. As company boards prepare to vote on the annual compensation of their senior executives, investors and the government in Britain are pushing for ways to shrink what some have called excessive pay packages. Over the last two months, two of the country’s biggest investors stepped forward to declare their general disapproval with the level of executive pay, and to call for investors to be given more say over the packages. Prime Minister David Cameron backed their calls on Thursday after saying that large pay packages, during times when many households have to tighten their belts, understandably “made people’s blood boil.” (more...) #
• 23 Jan. François Hollande, French Presidential Candidate, Says 'Finance' Is His Adversary. "I am ready." These few words, slipped into a speech that ran for nearly 90 minutes, summed up the message François Hollande tried to convey Sunday before some 25,000 supporters crowded into the Parc des Expositions at Le Bourget, just outside of Paris. In a hall filled to overflowing, fired up by the fervor of hypermotivated supporters, crushed by flags and posters, drowned out by the noise of vuvuzelas and foghorns, the Socialist candidate has undeniably succeeded in his show of power. From the opening of the festivities, led by Yannick Noah's upbeat concert, to the "Marseillaise" finale, sung on the platform by young supporters, far from the Socialist Party "elephants," there was not one false note in the program of the leader of the Left. (more...) #
• 17 Jan. The Monetary Authority of Singapore (MAS) will implement the regulatory framework for Credit Rating Agencies (CRA). MAS had issued a consultation paper on the proposed CRA regulatory framework in March 2011, as well as conducted discussions with the industry and market practitioners. MAS has carefully considered the responses received and thanks all respondents for their constructive and useful feedback. (Click here to view MAS' response to the feedback received). (more...) #
• 20 Jan. Is Banking Bad? Op-Ed by Nicholas D. Kristof. When I spoke at Swarthmore College recently, I was startled by one question: Is it immoral for students to seek banking jobs? The corollary question, with Mitt Romney’s business career under attack even by staunch Republicans, is this: Is it unethical to make millions in private equity? My answer to both questions: no. I’ve been sympathetic to the Occupy Wall Street movement, but, look, finance is not evil. Banking has contributed immensely to modern civilization. By allocating capital to more efficient uses, banking laid the groundwork for the industrial revolution and the information revolution. (more...) #
• 19 Jan. The World Bank joined the UN in ringing the alarm bells yesterday, warning that the global economy had entered a dangerous period, with some of the financial turmoil in Europe having spread to other high-income countries and developing economies, which earlier had been unaffected. (See FSF UN post) In its report, Global Economic Prospects 2012, the World Bank said developing countries should prepare for further downside risks as euro zone debt problems and weakening growth in several big emerging economies were dimming global growth prospects. The World Bank has lowered its growth forecasts for 2012 to 5.4 percent for developing countries and 1.4 percent for high-income countries, and is now predicting a 0.3 percent contraction for the euro zone, compared with estimates in June last year for growth of 6.2 percent, 2.7 percent and 1.8 percent, respectively. (more...) #
• 18 Jan. European bank capital: Banks in Europe scrape together the extra capital they need. The idea of getting Europe’s banks to plump up their cushions of capital to help restore confidence seemed sensible enough last year when it was championed by the IMF and then adopted by the European Banking Authority (EBA). But the journey to higher capital levels matters as well as the final destination. If banks with big shortfalls (see chart) simply slim their balance-sheets, that could hurt the flow of credit. It is better for Europe’s economies, if not for bank shareholders, if lenders raise the cash from investors. So the difficulties that have beset UniCredit, Italy’s biggest bank by assets, as it tries to plug a gap of €8 billion ($10.2 billion) are particularly ominous. UniCredit’s shares slumped by almost half after it approved a deeply discounted rights issue earlier this month, though they have recovered a tad since. (more...) #
• 13 Jan. A string of eurozone countries have had their credit ratings downgraded in a mass blitz by agency Standard and Poor's. France, Austria, Italy, Spain, Portugal, Slovakia, Malta, Slovenia and Cyprus have all been cut in a brutal round of downgrades. France and Austria both now hold AA+ ratings, while Italy, formerly an A-rated country, holds a BBB+. Spain will move down to an AA- rating, while Portugal moves to BB, Slovakia to A+ and Cyprus to BB+. Austria, France, Malta, Slovakia, Slovenia, Cyprus, Italy, Spain and Portugal also had their long-term ratings lowered. Only Germany, The Netherlands, Finland and Luxembourg kept their top-notch ratings in the cuts. (more...) #
• 13 Jan. ECB and BoE leave rates unchanged. European Central Bank. Introductory statement to the press conference. Mario Draghi, President of the ECB, Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. Let me wish you all a Happy New Year. We will now report on the outcome of today’s meeting of the Governing Council. Based on its regular economic and monetary analyses, the Governing Council decided today to keep the key ECB interest rates unchanged, following the 25 basis point decreases on 3 November and 8 December 2011. The information that has become available since early December broadly confirms our previous assessment. Inflation is likely to stay above 2% for several months to come, before declining to below 2%. At the same time, the underlying pace of monetary expansion remains moderate. As expected, ongoing financial market tensions continue to dampen economic activity in the euro area, while, according to some recent survey indicators, there are tentative signs of a stabilisation in activity at low levels. (more...) #
• 10 Jan. Sir Richard Branson's Virgin takeover of Northern Rock gathers speed as first branch is rebranded. Virgin Money has also appointed a new top team for its enlarged bank, after it took over Northern Rock on New Year's Day. Sir Richard Branson visited the first rebranded branch of Virgin Money, saying that he wants to improve banking. "The Virgin Group has always gone into markets where there's been an opportunity to make things better for customers. We've been doing it for 40 years," he said. "Now we want to do the same for banking. It's not something we take lightly. There's a lot of hard work ahead. But we have the people, the products and the plans in place". (more...) #
• 09 Jan. France’s financial and business establishment has attacked President Nicolas Sarkozy’s threat to introduce unilaterally a tax on financial transactions, saying it would hit the economy and damage the role of Paris as a financial centre. “Introducing a financial transaction tax which was not at least European, would weaken the French economy . . . and Paris’s place in the European and world economy,” said Paris Europlace, a financial markets association, which said it was speaking for industrial companies, insurers and institutional investors, as well as the banks. Mr Sarkozy confirmed on Friday that his centre-right government would seek to enact a so-called Tobin tax before the presidential election in April, if necessary in advance of other countries. Further delay was “unacceptable”, he said. (more...) #