RD News 21March12

• FSB: Improving Financial Institution Risk Disclosures 
• The FSB will facilitate the formation of a joint private sector task force to develop principles for improved disclosures based on current market conditions and risks, including ways to enhance the comparability of disclosures. The task force will be encouraged to have dialogue with standard-setting bodies.
• The FSB will also ask the task force to identify leading practice risk disclosures presented in annual reports for end-year 2011.

• EC: Shadow Banking – Green Paper
• Possible shadow banking entities and activities on which the Commission is currently focussing its analysis:
• Special purpose entities which perform liquidity and/or maturity transformation; for example, securitization vehicles such as ABCP conduits, Special Investment Vehicles (SIV) and other Special Purpose Vehicles (SPV)
• Money Market Funds (MMFs) and other types of investment funds or products with deposit-like characteristics, which make them vulnerable to massive redemptions ("runs")
• Investment funds, including Exchange Traded Funds (ETFs), that provide credit or are leveraged
• Finance companies and securities entities providing credit or credit guarantees, or performing liquidity and/or maturity transformation without being regulated like a bank.
• FSB rough estimate of  the size of the global shadow banking system € 46trillion in 2010, having grown from € 21 trillion in 2002. This represents 25-30% of the total financial system and half the size of bank assets.
• In the US, this proportion is even more significant, with an estimated figure of between 35% and 40%.

• BoE: Spencer Dale: Rebalancing the supply side of the UK economy: what; how; and issues for monetary policy
• The loosening in monetary policy undertaken in recent years encourages people to spend more and save less, and slows the reallocation of capital and labour to more productive uses.
• “Loose monetary policy can in part be thought of as a form of forbearance: putting off difficult changes and adjustments to a later day”. Monetary policy must trade off short-term support against stifling long-term change.

• Ben S Bernanke: The European economic and financial situation
• U.S. financial institutions have very limited direct net credit exposures to the most vulnerable euro-area countries, and U.S. ssss
• Although U.S. banks have limited exposure to peripheral European countries, their exposures to European banks and to the larger, “core” countries of Europe are more material. Moreover, European holdings represented 35% of the assets of prime U.S. money market funds in February, and these funds remain structurally vulnerable despite some constructive steps, such as improved liquidity requirements, taken since the recent financial crisis.