Financial Stability
Korea’s Kim calls for an end to currency reserves hoarding
Bank of Korea governor Choongsoo Kim says use of multi-layered financial safety nets would reduce the need for emerging economies to hoard foreign currency reserves; calls for a global effort
Systemic risk in Europe heightened by Target trap
Huge Target liabilities may explain why Germany sanctioned proposals for ECB bond-buying and the formation of the ESM. But this will not solve Europe’s problems
FSB presses forward with legal entity identifiers
Latest Financial Stability Board report shows further progress towards implementing the global legal entity identifier system with March 2013 deadline fast approaching
BIS research identifies ways to smooth the financial cycle
Bank for International Settlements working paper designs model of financial cycles and examines the difficulties of reducing the size of their peaks and troughs
New Zealand’s new capital standards at odds with Australia on ‘bail-in’
Reserve Bank of New Zealand’s new capital standards conform to Basel III requirements but concerns raised on how bail-in debt rules will tally with Australia
BoE and FDIC co-operate on bail-in plans
US deposit insurer and UK central bank release plans for resolution of global systemically important banks, focusing on a ‘top-down’ approach to maintain viability long enough for restructuring
EBA finds distortion in e-money practices across EU
Electronic payments market in Europe distorted by differing interpretations of EU anti-money laundering and counter-terrorist financing directives by member states, according to new EBA report
RBI’s Sharma urges euro area rebalance
Reserve Bank of India executive director says current account imbalances are ‘inherently unsustainable’; periphery countries must pursue greater productivity and competitiveness
BoJ paper finds noisy reference rate can create volatility
Working paper studies effect of reference rates on stabilising or destabilising interbank markets; finds noise in rates reported by large banks can feed volatility and impair monetary policy
Bundesbank at odds with new IMF position on capital controls
Board member says capital controls should be last resort, if used at all; follows updated IMF guidance that capital controls can have ‘substantial benefits’ when used properly
Dallas goes mobile with financial education
The Federal Reserve Bank of Dallas launches a mobile app designed to help people manage their money
Canadian research finds net liquidity boost from central clearing
Bank of Canada working paper finds small liquidity increase from use of centrally cleared derivatives
HKMA will honour Basel III deadline, says executive director
Karen Kemp says Hong Kong’s banks will not be put at a competitive disadvantage by implementing new capital standards before US and EU
Danish governor laments lack of euro progress
Nils Bernstein says Europe will ‘muddle through’ the crisis, but is concerned that government’s grand promises are yet to deliver a practical solution
IMF research seeks to harness shadow banking
Staff discussion note outlines the shadow banking system’s useful functions and systemic risks; contemplates appropriate policy response
Norges Bank to launch new banknote series
Norway’s central bank to release new banknote series to stay abreast of neighbours and keep counterfeiters at bay
CGFS report sets out framework for macro-prudential policy
Basel-based Committee on the Global Financial System (CGFS) report guides central banks on how macro-prudential instruments should be chosen, combined and employed
Stress test transparency can ‘persuade’ investors, says Bundesbank paper
Deutsche Bundesbank study says the disclosure of stress testing results and methodology can be designed to alter investor behaviour
Taming the finance monster
The best way to resolve global financial instability is for the owners of capital to assert themselves, with sovereign funds well positioned to take the lead, say Paul Woolley and Dimitri Vayanos
Euro periphery financial systems still ‘fragile’, reports show
Irish and Portuguese financial stability reports show financial systems have grown stronger in past year, but weaknesses persist
Regulators in Asia target shadow banking sector
Regulators in Asia are striving to strike balance between regulating the shadow banking sector and letting Asian financial intermediation develop
ECB paper models heterogeneous shock transmissions
Working paper examines macroeconomic and financial linkages between countries; finds significant but heterogeneous transmission of shocks
Iceland’s Guðmundsson identifies flaw in banking union plans
Már Guðmundsson warns lack of foreign currency lender-of-last-resort provisions is an important omission from economic and monetary union plans
IMF research highlights financial vulnerabilities in Latin American corporates
Working paper suggests booms may lead to over-leveraged non-financial firms, which could in turn transmit shocks into other sectors of the economy