Financial Stability
Bank of England waging payment system war on three fronts
Chief cashier Chris Salmon says the central bank must contend with issues relating to cyber security, user access and new regulation within the UK payments infrastructure
ECB’s Asmussen urges Denmark and Sweden to sit at banking union table
Jörg Asmussen says the single supervisory mechanism will be the envy of those outside the eurozone; tells Denmark and Sweden they will get more of a say if they have ‘a chair at the table’ now
Federal Reserve reveals new, tougher stress tests
Details of stress tests for 2014 include scenario based on severe global recession, with some banks facing additional criteria; tests will be applied to 12 more banks than before
BoE official calls for greater transparency on CCP margin modelling
Central counterparties should compete on quality of risk management, rather than a race to the bottom on margins, says Bank of England's head of payments and infrastructure
Cypriot commission criticises ‘cumbersome’ managerial structure at central bank
Independent commission wants to see more power handed to the executive and non-executive directors at the Central Bank of Cyprus; says senior management dropped the ball on financial stability
Thailand’s Prasarn highlights ‘dramatic’ turnaround caused by Fed taper-talk
Embattled emerging market central banks trying to resist capital inflows suddenly had the opposite problem as Fed hinted at QE taper, but some may have tightened too fast, says Thai governor
Tax relief for debt finance helps banks and non-banks, IMF paper finds
There is no significant difference in corporate tax bias towards debt finance between banks and non-banks, according to IMF working paper; Size and leverage levels of firms matter
Norges Bank governor heralds countercyclical capital buffer
Øystein Olsen says 'primary purpose' of prudential tool is increasing banks' resilience as systemic risk increases; buffer will vary between zero and 2.5% of risk-weighted assets
Leading central banks make emergency swap lines permanent
Six leading central banks are leaving bilateral swap agreements introduced during the financial crisis in place until further notice; US dollar liquidity-providing operations will continue as normal
Swiss researchers sceptical about advanced settlement algorithms
SNB working paper says overhauling the algorithms used in the Swiss Interbank Clearing system would produce an ‘economically irrelevant’ reduction in settlement delay and ‘low’ cost savings
Portugal governor: banks are stronger now than pre-crisis
Bank of Portugal's Carlos da Silva Costa argues stringent capital requirements 'well above the EU 8% benchmark' are starting to pay off; banks' average loan-to-deposit ratio was 123% in June
Bank of Spain's Linde touts comeback of local banks
Governor says lenders' solvency position has improved noticeably from a year ago; highlights 'drastic reduction' in toxic assets on banks' balance sheet
RBI paper finds Indian banks were not spared by financial crisis
Working paper says that despite the global financial crisis being concentrated in advanced economies, weaker Indian banks saw their margins ‘impaired significantly’
Slovene bank clean-up provides stress test dry run for ECB
IMF urges country to recapitalise banks quickly; academics see country as 'methodology experiment' for ECB, and warn comparisons with Greece and Cyprus could be self-fulfilling prophecies
ECB's Cœuré urges eurozone to take lessons from Asia
Executive board member says governments' response to the Asian financial crisis, including overhaul of domestic financial sectors, made for painful adjustment but swift recovery
Banque de France backs efforts to circumvent ratings agencies
Central bank gives scathing assessment of credit ratings agencies and supports Esma proposals to reduce reliance on ratings; Moody’s and S&P critical of the plans
Group of 30 calls for closer relationships between bank boards and supervisors
Report authored by a G-30 committee headed by Roger Farmer argues for a ‘new paradigm' in which bank boards and supervisors work more closely together towards their shared objectives
RBA paper supports CCP interoperability
Researchers weigh the benefits of increased netting across linked central counterparties against the potential costs arising from the bilateral exposures each link creates
State Bank of Vietnam taps Thomson Reuters for FX monitoring system
Vietnam's central bank takes a step forward in increasing transparency and reporting in its foreign exchange market
A new and explicit policy on liquidity provision
The Bank of England's new rules on liquidity provision reflect much closer regulation of banks' liquidity policies and a desire to avoid the mistakes of the crisis
Hedge funds caused post-Lehman liquidity crisis, research finds
Staff report from the New York Fed argues the evidence points to hedge funds, rather than dealers, precipitating the post-Lehman liquidity crisis - with implications for rules on prop trading
External balance-sheet structure key in explaining the financial crisis
High gross external debt was indicator of subsequent vulnerability, according to BoE paper; finds ‘important interaction' between 'competing ‘savings glut' and ‘banking glut' hypotheses
Fed targets tougher LCR for US banks
Federal Reserve proposes a liquidity coverage ratio for country’s largest financial institutions that goes above and beyond the Basel III minimums
Carney says BoE 'open for business' ahead of QE wind-down
Extra money for more types of collateral to be made available over longer tenors and at cheaper prices, in a bid to prepare UK banks for the end of QE; facilities could also be opened to non-banks