Financial Stability
IMF staff want ‘clear mandate’ for next Bulgarian governor
Statement at close of latest Article IV with Bulgaria outlines policies for restoring supervisory credibility in the wake of the failure of the country’s fourth-largest bank
Bank of Latvia establishes first overnight clearing cycle
New cycle will accelerate processing of retail payments submitted late in the day and comes with an upgrade to business continuity that should see fewer payments rejected
Standard stress tests could create more risk, CCPs warn
CPMI and Iosco aim to develop a standard stress test for CCPs, but market participants say the devil will be in the detail
Nalm Europe: Markets may be struggling to digest news, warns BoE’s Salmon
Liquidity droughts and high volatility seem to be increasingly common – not necessarily problems in themselves, but the threat of contagion is becoming a concern, BoE markets director says
Zeti argues ringgit is ‘undervalued’ but rules out dollar peg
Bank of Negara Malaysia governor rules out pegging the ringgit to the dollar, but revealed she considers the currency to be ‘significantly undervalued’
BoE agents shift perspective towards shadow banking
Role of central bank agents shifts towards financial stability and brings particular benefits in tracking the rise of non-bank finance, shows BoE quarterly bulletin
Bank of Mexico expands dollar sales to stabilise peso
Mexico’s central bank is slowing the pace of reserve accumulation to fund $52 million daily auctions for the next three months, after the peso hit an historic low
Bank of Spain takes over unit of Andorran bank facing US probe
Bank of Spain appoints two administrators to Banco de Madrid, after Andorran parent company named as ‘primary money laundering concern’ by US authority
ESRB group wants treatment of sovereign debt reviewed
Report published by European Systemic Risk Board argues sovereign debt can no longer treated as risk-free, and outlines different ways the regulatory framework could be adapted
ECB’s Mersch tells banks to take advantage of reforms
Banks should tap into the ‘sizeable’ opportunities offered by banking union, ECB executive board member says, which could help them provide more credit to SMEs
MAS and Esma ink cross-border CCP clearing deal
MoU paves way for Singapore CCPs providing clearing services to European banks to obtain EU recognition while remaining subject only to MAS regulatory regime
IMF sees deflation threat to Western Balkan recovery
Special report on economic transition in Western Balkans identifies deflation spilling over from eurozone as risk to recovery in the region; most of the countries experiencing negative inflation
BIS paper says liquidity regulation should not replace lender of last resort function
Lender of last resort and liquidity regulations perform separate roles, and therefore one cannot replace the other, working paper says
VAR limits: dislocations put focus on other lines of defence
Dislocations in the Swiss franc and the US Treasury market have highlighted the limitations of standard regulatory capital models, but banks insist their other lines of defence are up to the task
RBA research sets out stress test for households
Model emphasises dangers of relying on aggregate measures of household indebtedness when assessing financial stability and setting monetary policy
EBA offers advice on determining ‘critical functions’ in resolution
Technical advice seeks to clarify EU resolution directive in setting out exactly which parts of a bank are essential for financial stability; bank resolution plans found to be lacking in some areas
EU exit not disastrous to UK investors, Lamont says
The former Conservative chancellor says fears of financial turmoil in the UK after an EU withdrawal are exaggerated
US banks hold up under Fed stress tests
Latest annual stress tests show 31 largest bank-holding companies would lose $490 billion under the Fed’s severely adverse scenario, which has been tightened compared to 2014
RBA mulls creation of repo CCP
Australia currently lacks a CCP for clearing repos, which could be exacerbating systemic risk and impairing market functioning, but previous efforts met with little enthusiasm
Spanish deputy favours ‘moral persuasion’ in supervision
Fernando Restoy believes supervisors should have the ‘ability to influence the decisions’ of the managers of the entities it oversees through ‘moral persuasion’
FSB-Iosco tweaks systemic shadow bank definition after criticism
Initial proposals for identifying systemic ‘non-bank non-insurers’ ran into criticism last year, with asset managers complaining rules put too much emphasis on size
Court rules against ECB in CCP case
European court finds ECB does not have authority to regulate securities clearing systems in the EU, upholding a UK plea against rules forcing CCPs to be located in the eurozone
Sarb deputy governor fears for oil-exporting countries
The positive and negative shocks of falling oil prices are ‘asymmetric’ and the impact on oil-exporting countries could ‘elevate’ global financial stability concerns, warns Groepe