Financial Stability
US and UK regulators have no ‘informal agreement’ on fines, says FCA chief
Financial Conduct Authority chief Martin Wheatley denies existence of a formula agreement for fines imposed on financial institutions among US and UK regulators
China sees accelerating interest rate reform, starting with deposits
China expected to follow lending rate liberalisation with removal of the deposit rate cap; new agency created to co-ordinate financial regulatory bodies
Dutch executive director warns banks against ‘charm offensive’
Jan Sijbrand says banks will only win back public trust by making more ‘prudent’ decision-making, and explains how the central bank has bolstered its corporate governance
San Francisco Fed president warns asset price bubbles are ‘here to stay’
John Williams discredits economic theory on asset price movements; says bubbles are inflated predominantly by expectations of future price increases
RBNZ licenses 99 insurers as three-year deadline passes
New Zealand's 2010 Insurance Act gave insurers until this Saturday to apply for and receive a licence allowing them to continue business operations in the country
Hungary signs RMB swap line with PBoC
Agreement is the People's Bank of China's second with an EU member state following deal with the UK; equals the size of swap line China has with its neighbour Mongolia
Bundesbank economists propose composite FSI with real economy predictive power
Composite financial stress indicator is better at predicting developments in the real eurozone economy than volatility indexes that are currently commonly used
Sri Lanka central bank launches liquidity support scheme
Immediate support granted to licensed financial companies facing liquidity constraints; CBSL may also call for fresh injections of shareholder capital
Obstfeld: Weak ex ante financial constraints prompt 'bad equilibria' in markets
Absent adequate fiscal space, financial instability will lead to price instability or sovereign default, which will further impair the functioning of financial markets
Mersch backs close relationship between monetary and macro-prudential policies
ECB executive board member says policies should take one another into consideration and exploit informational synergies; LSE academics concerned by politicisation of macro-prudential frameworks
FSB flags up financial reform concerns
Financial Stability Board reports on progress of financial reforms to G-20 leaders; details the ‘serious problems’ emerging in some areas of national policy implementation
Customers of failing banks less likely to trust other people
DNB working paper says mistrust prompted by experience of crisis increases likelihood of bank runs and undermines long-term growth
Implicit government guarantees leads to increased risk-taking at banks
Fed discussion paper argues that strengthening market discipline by reducing bank complexity is needed to address moral hazard
Riksbank holds rates as IMF sees ‘sizeable' risks at Swedish banks
Interest rates held at 1% as Swedish central bank attempts to support growth without adding to household debt stock; IMF Article IV report frets over large and vulnerable financial system
European Commission launches shadow banking onslaught
Commission looks to impose more stringent liquidity and capital requirements on money market funds; industry body hits out at 'ill-considered' proposals
Bank of Finland deputy calls on Denmark and Sweden to join the SSM
Pentti Hakkarainen says a strong Nordic dimension in the European banking union would benefit all countries involved; Sweden focused on domestic supervision for time being
Financial contagion function of reputation rather than size of banks
Bank clustering and large in-coming interbank loan more important than leverage ratios, while central bank intervention reduce contagion only slightly, Bank of Finland discussion paper finds
German banks move to lower-risk sovereign bonds
Deutsche Bundesbank discussion paper investigates banks exposures to sovereign debt and finds they are increasingly investing in bonds from larger countries with lower inflation
Danish central bank calls for better liquidity management in payments markets
National Bank of Denmark urges market participants to reserve ‘adequate liquidity’ for payments settlement; breaks down ongoing modernisation of financial market infrastructure
Carney urges G-20 leaders to cooperate
FSB releases report on global progress toward ending too-big-to-fail as its chairman, Mark Carney, stresses importance of cross-border cooperation over global financial reforms for global trade
Regulators exempt forex swaps and forwards from initial margin rules
Working Group on Margining Requirements exempt forex swaps and forwards from initial margin rule for non-centrally cleared derivatives; offer a more restricted exemption for cross-currency swaps
Sovereign default spreads drove European bank risk exposures during crisis
Systemic risk of European banks reached its height in late 2011 at around €500 billion, based on a measure introduced in a recent Fed working paper
US takes lead in ending credit rating agency ‘hard-wiring’, says FSB
China, Indonesia and South Korea have made little progress in dealing with concerns about over-reliance on credit rating agencies; US takes the lead, followed by Europe, in reducing hardwiring of ratings in the financial system, FSB report finds
ECB's Mersch calls for clearer separation of powers in bank resolution framework
European Central Bank executive board member believes current agreement in Europe on a resolution framework - 'decentralisation plus discretion' - is 'the wrong combination'