Financial Stability
RBA research suggests options for IMF to overcome governance issues
Analysis of constraints on IMF actions suggests seeking backup from other international organisations could add to political clout, but quota reform remains a problem
EBA proposes curbs on shadow bank exposures
Financial institutions will be expected to set their own limits, except in cases where information or internal processes are lacking; ‘fallback’ option may need adjusting, EBA admits
Hellwig and Wolf question efficacy of financial reforms
Martin Hellwig and Martin Wolf discuss flaws in financial reforms aimed at breaking the sovereign-bank linkage in book on country and political risk
ECB paper emphasises importance of time horizons for early-warning models
Working paper finds the selection of a particular time horizon can have ‘considerable implications’ for the performance of economic variables in predicting bank crises
Banks could face fines of $4bn from US DoJ
The fines being hammered out would nearly double the total already paid to regulators during the currency probe
BIS charts ‘boundaries of the unthinkable’ as risks rise
Quarterly review flags growing vulnerabilities and signs of credit booms in some economies; research finds limited impact of deflation on growth, pointing to importance of financial sector
IMF paper warns against ‘overburdening’ LatAm central banks
Working paper studies evolution of central banks in Latin America, and warns against jeopardising the credibility they currently enjoy by handing them new mandates
BoE’s Brazier sees room for improvement in stress testing
New executive director outlines enhancements including counter-cyclical testing and extending the regime to the non-bank sector
Gradual rollout for China's payment system
The country’s cross-border interbank payment system will further contribute to the internationalisation of the renminbi
Paper examines role of capital in BHC lending decisions
Authors find an increase in capital requirements of bank holding companies is ‘likely’ to increase the interest rate charged on loans, resulting in a ‘significant’ reduction in lending
RBA’s Debelle tackles term premia puzzle
Guy Debelle says the most plausible explanation for the prevailing low level of term premia in global fixed income markets is the shortage of risk-free assets
Bank of Spain administrators file for Banco de Madrid bankruptcy
Spanish central bank announced today Banco de Madrid has filed for bankruptcy after a large withdrawal of funds ‘affected its ability to meet its obligations in a timely manner’
Iceland expects ‘significant’ progress in lifting capital controls this year
Healthy economy and sturdy banking system pave way for lifting of capital controls, but risks are 'tilted to the downside', IMF report says; central bank at a ‘difficult juncture’
Bank of Uganda explains currency dynamics
Central bank attributes depreciation of the shilling against the dollar to both the strengthening of the US currency and the increase in demand for the greenback to fund imports and pay dividends
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