Financial Stability
Limited liability distorts incentives for disaster planning, paper argues
Consequences of recent events with catastrophic financial ramifications have been greatly aggravated by policy-makers’ failure to prepare, says ECB working paper
Rajan warns banks there will be no more ‘extend and pretend’ on NPLs
Banks need to face the fact that large chunks of their assets are non-performing, and the RBI will no longer prop them up via a policy of forbearance, governor says
Strategic default helps explain crises in advanced economies, ECB paper finds
Sovereign debt and financial re-allocation are linked by the use of government bonds as collateral on the interbank lending market, paper notes
BIS researchers dissect emerging market fire sales
Working paper picks apart the channels through which asset management impacts on emerging bond markets, finding evidence of procyclical behaviour
RBNZ deputy defends change in mortgage ‘speed limit'
Concession allowing 5% of new mortgages to exceed LTV ratios will not add fuel to market rally that has seen Auckland house prices rise by 24% in past year, deputy governor says
Venezuelan inflation still running at over 700%, expert says
Venezuela’s central bank appears to be unable to make any impact on soaring inflation levels and has not reported an inflation number this year, says Steve Hanke
Leverage is key factor in threat posed by bubbles, study finds
A San Francisco Fed study of 17 bubbles over the past 140 years provides empirical support for the idea that leveraged bubbles have most potential for damage
Zeti stresses need for good data in promoting financial inclusion
Bank Negara Malaysia governor says better data helps put pressure on countries to improve financial inclusion; offers guidance on how to improve performance
Falling real rates put US ‘at risk of financial instability’, says Kocherlakota
Minneapolis Fed president warns that long-run real interest rates are falling and risk causing financial instability and ineffectual monetary policy
RBNZ tweaks macro-prudential plans after banks push back
Banks will be subject to more lenient ‘speed limits’ and will have more time to adapt to new macro-prudential rules, after the industry complains
Stress indexes have widely varying signal benefits, Fed paper says
Cleveland’s index gives the best picture of current financial stress conditions, but few indexes have value in predicting future problems, Cleveland Fed study says
Fed data gives model of banks’ settlement service choices, paper argues
Data from the Fed’s Fedwire payment service shows that banks select payment services based on average rather than marginal cost, study finds
Central bank restricts lending at half of Ireland’s credit unions
Ireland’s central bank has restricted lending at the country’s credit unions and appointed external auditors to discover the true state of lending in the industry
RBI licenses prospective mobile phone bankers
India’s central bank grants provisional licences to 11 companies to run mobile phone-based banking for poorer Indians
CPMI-Iosco unveil plans for unique transaction identifiers
Consultation lays out proposals for codes to identify over the counter derivatives transactions, as part of efforts to improve reporting to trade repositories
Nigeria’s efforts to support currency could unravel
Nigeria’s central bank governor is imposing strict capital controls to cope with the country’s slumping oil revenues but analysts predict naira devaluation is only a matter of time
IMF paper: capital inflows work differently on credit for households and firms
The composition of capital inflows affects whether and how they cause credit growth, IMF working paper says
CoCo bonds decrease banks’ appetite for risk, paper argues
Convertible bonds decrease banks’ incentives to take risks in highly-leveraged states, a DNB working paper argues
RBA report reveals changing pattern of card use
Australians are increasingly favouring debit over credit cards for payments but both have been increasing in volume and value
BoE economists mine tweets for early-warning indicator
Central bank put its work on ‘text mining’ and big data to work during Scottish independence referendum in an attempt to create an early-warning indicator for bank runs
Swedish regulators press government for clearer powers
Heads of Riksbank, FSA and National Debt Office call for government to speed up implementation of new legislation on macro-prudential powers, but minister says it could take until next year
China should ‘rein in’ vulnerabilities, IMF warns
Economy faces challenge in balancing reform and growth, with IMF warning of growing risks in the financial system and need for further rebalancing
HLA could incentivise systemic activity – Swiss Re
Swiss insurer's head of governmental affairs says crude measures might have unintended consequences for systemic risks
IMF presses for Greek debt relief as Eurogroup meets
Fund official says decision must be taken on debt relief before IMF will consider providing new funds; leaked document suggests ECB and Commission are concerned about sustainability