Financial Stability
Book notes: The Great Divide, by Joseph E Stiglitz
Stiglitz’s new book argues that deregulation was an important cause of the recent banking crisis
Book notes: Efficiently Inefficient: How Smart Money Invests and Market Prices are Determined, by Lasse Heje Pedersen
A book that offers a condensed picture of hedge funds’ operations and strategies, written by a person with considerable academic and practical experience
Book notes: The Lion Wakes: A Modern History of HSBC, by Richard Roberts and David Kynaston
A weighty tome, commissioned by HSBC to commemorate its 150th anniversary
Book notes: Money and Trade Wars in Interwar Europe, by Alessandro Roselli
Alessandro Roselli’s book on interwar Europe should be compulsory reading for all those who are handling or interested in the current crisis in the euro area
Greek memo reveals commitments necessary to access bailout funds
Leaked document shows string of ‘prior actions’ government must complete before it can access up to €86 billion of euro funds
Bank of Russia presses ahead with rating agency plans
Russian central bank governor Elvira Nabiullina says banking sector is ‘safe’ and economy will soon have its own financial ratings agency and electronic payment system
UK regulators spare Co-op Bank £120m fine
Bank of England and FCA ‘censure’ the troubled bank for multiple failures including not being open with regulators, but drop a £120 million fine on financial stability grounds
Change to broken benchmarks years away, say industry commentators
After the FCA produced a review criticising banks for not learning the lessons of Libor and forex, observers predict no major benchmark reform until efforts co-ordinated with industry
Icelandic paper looks for early-warning signals across past crises
Working paper identifies six clusters of financial crises in the country since 1875; finds macroeconomic variables give a ‘more robust warning signal’ than financial alternatives
CLS develops cleared FX settlement service with LCH.Clearnet
Designed specifically for central counterparties and cleared FX products, the service aims to minimise risk in the industry
Bank of Canada paper flags risk of spillovers from emerging to developed economies
Researchers show how a search for safe assets could transmit instability to developed economies as capital flows out of emerging markets
End of sanctions could be double-edged sword for Iranian banks
Iran central bank vice-governor warns domestic banks have work to do before they are opened up to international competition, but Iranian investors see end of sanctions as broadly positive
Lobbying softens regulatory treatment of distressed banks in US, paper finds
Under-capitalised US banks are less likely to be rigorously supervised if they have exercised political or regulatory influence, a working paper published by the ECB finds
Swedish deputy wants macro-pru tools for non-banks
Policy-makers must develop new macro-prudential tools for addressing risk in the non-banking sector, warns Sveriges Riksbank’s Cecilia Skingsley
ECB researchers examine flight to safety during sovereign debt crisis
Working paper tracks geographical distribution of capital flight, finding different movements by intra-eurozone and external investors; movements ceased when OMTs were unveiled
Spanish paper puts crisis legacy into context
Working paper suggests long-run trends in population and productivity growth could hamper the ability of policy-makers to address the legacy of the crisis
BIS economists warn of emerging market policy dilemma
Emerging markets are increasingly exposed to monetary policy in developed economies, transmitted via lower long-run rates, and it is not clear what central banks can do about it
ECB paper models joint default risk with fat tails
Researchers reject normal distribution in favour of one with fatter tails, find ‘unprecedented’ tail risks in 2011-12 fell sharply after the OMT announcement
RBA’s Ellis is grateful lending standards to first-time buyers have not eased
Head of financial stability tells standing committee the prevalence of investors in the housing market could be pricing aspiring first-time buyers out of a move, but only ‘at the margin’
Nigeria bans foreign currency cash deposits
Central bank move comes as part of a clampdown on ‘illicit funds’ passing through banks; follows a series of measures aimed at stabilising exchange rate
Bundesbank’s Buch casts doubt on Greek debt relief as talks end
Deputy president takes stance at loggerheads with IMF as latest round of negotiations draws to a close; Greek finance minister strikes upbeat note
UK payments regulator evaluates efforts to improve access
Banks and payment systems now expected to be more transparent about criteria for access; regulator says this is now bearing fruit, but the real tests are yet to come
Fresh delay will push EU-US CCP row into September
Decision had been expected in July; dealers sceptical new timeline will hold
BIS paper captures financial shock using five DSGE models
Authors from the Federal Reserve find even models with a common core produce very different estimates of the spillovers of a financial shock to the real economy