RD News 3May12

• Speech by Mervyn King at the 2012 BBC Today Programme Lecture
• In “hindsight” the Bank could have done more to warn of the dangers to financial stability prior to the crisis, but most of the blame should be laid at the door of the banks, the government of the day and the general “regulatory approach” of the time for the failure to head off the crisis. 
• The current crisis is “far from over” , and the Bank will play an important role with its new responsibilities in ensuring a recovery from the current “bad banking situation”.
• Points to the “three Rs”: regulation, resolution, and restructuring. These refer, respectively, to the return of regulatory responsibility to the Bank, the creation of a resolution framework for managing the failure of banks, and the restructuring of banks through the implementation of the Vickers’ recommendations.
• Calls on the UK Government to implement the recommendations of the Independent Commission on Banking “sooner rather than later”.
• Link to the audio on YouTube.

• ECB Paper: Shadow Banking in the Euro Area
• Its economic and financial statistics are currently not detailed enough to allow for a full understanding of the risks posed by ‘shadow banking’, or credit intermediation conducted outside of the regulated banking system.
• The paper investigates the extent of shadow banking and its structure across the euro area.
• More micro-economic data and qualitative information are needed to identify maturity and liquidity transformation and thereby assess the case for regulatory intervention.
• With the European Commission currently consulting on potential regulatory measures for shadow banking, this paper serves as a reminder that understanding of the issue is still developing.

• EU finance ministers fail to agree position on bank capital despite talks reported to have lasted over 15 hours
• Disagreements persist over so-called ‘maximum harmonisation’, whereby capital levels would represent not only a minimum, as explicitly envisaged by the Basel Committee on Banking Supervision (BCBS), but also a maximum.
• Some countries, notably the UK and Sweden, want the power to impose higher capital ratios on their own banks as part of their macroprudential toolkits.
• There are also reports that ministers failed to agree on a common definition of regulatory capital. Competing definitions could lead to variations in capital requirements of up to 300 basis points, some reports suggest.
• The ministers postponed the target date for a deal to May 15.
• Reports from Bloomberg, Reuters and Market News International.