RD News 16Jan12

• FSB: Proposed extensions to SIFI framework
• Framework will be extended to include domestic systemically important banks, and globally systemically important insurance companies, as well as other types of financial institution.

• BIS: Currency internationalisation: lessons from the global financial crisis and prospects for the future in Asia and the Pacific

• CFTC: Commissioner suggests Volcker rule rethink needed
• Scott O’Malia: rule is too complex, and may ‘fall short of providing an appropriate foundation for a rigorous and reliable rulemaking process’.
• CFTC and other agencies will have to re-propose the rule in order to combat complexity and clarify roles between regulators.
• Reservations about the compliance programme mandated by the proposed rule, as well as the viability of enforcement, and the extraterritorial implications.

• Stiglitz: Many Americans gave up hope last year – 2012 will be worse
• Middle-aged people who thought that they would be unemployed for a few months have now realised that they were, in fact, forcibly retired.
• Austerity will only exacerbate the economic slowdown. Without growth, the debt crisis – and the euro crisis – will only worsen.
• Increased investment to retro-fit the economy for global warming would help to stimulate economic activity, growth, and job creation.
• Global economic rebalancing is likely to accelerate, almost inevitably giving rise to political tensions.#

• IMF: Foreign Banks: Trends, impact and financial stability
• There has been a substantial increase in foreign bank presence. Current market shares of foreign banks average 20% in OECD countries and 50% elsewhere.
• Foreign banks have higher capital and more liquidity, but lower profitability than domestic banks do.
• In developing countries is foreign bank presence negatively related with domestic credit creation.
• During the global crisis foreign banks reduced credit more compared to domestic banks, except when they dominated the host banking systems.

• IMF: A Toolkit to Assessing Fiscal Vulnerabilities and Risks in Advanced Economies
• Short term pressures:
• Gross funding needs
• Market perceptions of default risk
• Stress dependence among sovereigns
• Medium/long term pressures:
• Budgetary adjustment needs
• Susceptibility of debt projections to growth and interest rate shocks
• Stochastic risks to medium-term debt dynamics.

• BIS: Masaaki Shirakawa (Gov, Bank of Japan): Deleveraging and growth – is the developed world following Japan’s long and winding road?
• Of the three factors that define the length of time needed for deleveraging, the first one – the initial size of excess debt – is a given once a bubble bursts, but we can still influence the remaining two factors: the growth potential of individual economies and growth momentum in the global economy as a whole.
• Financial institutions’ activities are influenced not only by the expectation that a stable environment will continue but also by incentives created by the regulatory and supervisory framework.
• Supervisors must find the right balance between two important tasks: restraining excessive risk taking and securing the profitability of financial institutions.