- ESRB: Capital raising urged
- European banks should adhere to the EBA’s (EBA) recommendations and raise a 9% capital buffer, by restricting remuneration and dividends, in a way which avoids ‘a disorderly or excessive deleveraging process’.
- There currently exists ‘a climate of extreme risk aversion’ which is impairing financial markets.
- The swift and coordinated implementation of EU decisions is now of utmost importance.
- India issues Basel III guidelines
- RBI guidelines set Common Equity Tier 1 capital at 5.5% of RWAs, with Tier 1 capital of 7%, and overall capital of at least 9% of RWAs.
- A capital buffer of 2.5% of RWAs, made up of Common Equity, will also be required.
- The implementation is ahead of the Basel III timetable in some respects, to be complete by 31 March 2017.
- The RBI said ‘banks would be expected
to strive to operate’ a minimum Tier 1 leverage ratio of 5% - stricter than the
Basel minimum of 3%, although the RBI points out that on average, Indian
commercial banks already operate within this ratio.
- Andrew Sheng: Risk and uncertainty will continue into the new year
- Discusses Benoit Mandelbrot and Richard Hudson's 2008 book on The Misbehaviour of Markets: A Fractal View of Risk, Ruin and Reward:
- Prices are not independent of each other. Their evolution goes through periods of quiet and then extreme volatility.
- Power laws (curves with long tails) are more common in nature than "normal" statistical bell curves.
- Intrinsic value is meaningless in a world of ever-changing prices. At the height of a bubble, the astronomical prices transacted bear no relationship to replacement cost.
- Our value systems are determined by
our culture and that is today more determined by Mother Nature, technology and
forces that we do not understand.
- Obama nominates 2 new Fed Board members
- Jerome Powell – visiting scholar, Bipartisan Policy Center, Washington. Served in Treasury Dept under Bush, former partner, The Carlyle Group.
- Jeremy Stein - Moise Y. Safra
Professor of Economics at Harvard.
Fomerly taught at MIT’s Sloan School and HBS. Served as a senior advisor to
Treasury Secretary Timothy Geithner, and on the staff of the Obama
Administration’s National Economic Council.
- WSJ: The 2012 Regulatory and Market Landscape
- Which non-banks will be designated SIFIs by FSOC?
- Analysts widely expect that GE Capital, and insurers Prudential Financial and MetLife will be labeled systemic; the latter are the two largest U.S. life insurers by assets.
- AIG is also seen as a likely pick because it was the recipient of one of the biggest federal bailouts of the 2008 financial crisis after losses in a financial-products unit almost caused the company to collapse.
- Some observers say asset managers like BlackRock Inc. also will be tagged.
- MMF reform tussle:
- SEC Ch Mary Shapiro arguing for additional overhauls after 2010 changes – possibly bank-like capital buffers.
- But most of her fellow commissioners
are not convinced, concerned the capital-buffer idea that Ms. Schapiro has
outlined would hamper ‘small to midsize companies that rely on money funds to
meet their payroll, without adding to investor protection.’
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