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Investment Analysis Clubs / Macro Economic Trends and Risks
|Subject: Re: Countdown to the next financial bomb||Date: 10/7/2012 5:27 PM|
|Author: SuisseBear||Number: 405509 of 449281|
BOTTOM LINE IMO is that firms will continue to see large trades that go bad by “surprise.” The odds of a regulatory answer seem low.
There will be one but the chances that it will be an effective one don't seem to be brilliant. Between US, UK, and Europe, there are now three different proposals on the table. The first sentence says it all:
AT LEAST the lawyers will be happy. Banks are already straining to come to terms with two reforms designed to reduce the risks that investment banks pose to other bits of the banking industry: America’s Volcker rule, which aims to ban proprietary trading (trading for their own profit) by banks; and the Vickers “ring-fence”, which proposes to force British banks to isolate their retail activities from trouble in their wholesale arms. Now European banks must gen up on a third proposal.
This one was presented on October 2nd to the European Commission by a group of experts led by Erkki Liikanen, the governor of the Bank of Finland. The group had been asked to report on whether Europe ought to split up its banks to reduce the risks to taxpayers of having to bail them out. Mr Liikanen’s experts concluded that there should be a strict separation between investment banking and retail banking. They also proposed forcing banks to hold more capital against some of their risky businesses, and to have debt that could be “bailed-in”, or turned into equity, to recapitalise an ailing bank. ...
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