RD News 10May12

• Andrew Haldane: On counterparty risk (A paper appearing in the May 2012 Journal of Risk Management in Financial Institutions)
• The financial crisis demonstrated the inadequacy of the management of counterparty credit risk and the vulnerability of financial structures to counterparty concerns.
• Three possible solutions are proposed to mitigate such risks in the future:
• improved network visibility;
• the clearing of transactions;
• building protection against counterparty default.

• Robert Jenkins (member of the FPC, BoE)
• Bank executives: now we have your attention…
• Bank performance metrics must reflect the risks they take to achieve a given return.
• Basel II proved to be inadequate, so are the new rules really ‘too severe’?
• Time will tell whether the new Basel capital levels will be enough to absorb losses from risks we understand and those risks we may not understand, “but if we are to err at all, surely it should be on the side of too much rather than too little capital.”

• IOSCO consults on Money Market Fund Systemic Risk Analysis and Reform Options