Financial Regulatory Forum

BREAKINGVIEWS – Crisis hasn’t made the world more balanced

– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –

By Edward Hadas

LONDON, Jan 20 (Reuters Breakingviews) – Some crises lead to the solution of an underlying problem. Mervyn King, the governor of the Bank of England, pointed out in a speech on Tuesday that the recent financial mess has as yet done nothing of the sort.

The problem in question is the accumulation of foreign currency assets. Those pile up — like a brick tower built without mortar — whenever cross-border trade is unbalanced. As of 2008, the world’s high-saving countries were adding bricks at an annual rate of $1 trillion, about 2 percent of global GDP.

The world just does not have enough safe investments to absorb all that cash. So the tower has a tendency to sway — rapid shifts of exchange rates and asset prices — and could some day collapse. The higher it gets, the more likely a great big fall.

Even after the credit crunch, the tower is still standing. The dollar has been battered, but remains the world’s reserve currency. The U.S. trade deficit has shrunk but is still unhealthily large, and once again increasing. The reforms of the financial sector currently under discussion are necessary, but will do almost nothing to make the tower more secure.

Bankers, regulators eye next generation of CoCos

By Jane Merriman
LONDON, Nov 20 (Reuters) – Investment bankers are already pitching to clients a new form of hybrid bond that financial regulators see as a potential saviour of troubled banks, but it is uncertain if they will work or if investors will buy them.The bonds, which convert to equity if a bank’s capital runs low, have been created for Lloyds as part of a 21 billion pound ($34.63 billion) capital raising to free the UK bank from a government insurance scheme for bad loans.


Draft UK bank law confirms tougher watchdog powers

Britain's Chancellor of the Exchequer Alistair Darling and his wife Margaret leave 10 Downing Street to attend the State Opening of Parliament, in central London November 18, 2009.       REUTERS/Suzanne Plunkett (BRITAIN POLITICS)By Huw Jones
LONDON, Nov 19 (Reuters) – Britain’s financial watchdog will have powers to claw back bank bonuses that breach globally agreed rules on remuneration and force hedge funds to provide data, a draft law published on Thursday showed.


UK banks should use bonus cash to lend – Conservatives’ Osborne

British opposition Conservative finance spokesman George Osborne speaks at a Reuters Newsmaker event in London October 26, 2009.  Osborne said that British retail banks should be stopped from paying big cash bonuses and use the money instead to support new lending.     REUTERS/Kevin Coombs (BRITAIN BUSINESS POLITICS)   By Matt Falloon and David Milliken
LONDON, Oct 26 (Reuters) – British retail banks should stop paying big cash bonuses and use the money instead to support new lending and contribute to an economic recovery, opposition Conservatives’ finance spokesman George Osborne said on Monday.


British bankers dubious over plans for new supervisory body

LONDON, Oct 14 (Reuters) – Britain’s banking association cast doubt on Wednesday on plans for a new national body to spot asset bubbles and stop them from getting out of control, saying its members were not sure how it would work.

BoE says opens monetary framework to smaller banks

BRITAIN-BANK/RATES    LONDON, Oct 5 (Reuters) – The Bank of England said on Monday it will give more banks access to its open market operations to help smaller institutions better manage their liquidity. (more…)

BoE mulls rate cut on bank reserves to stimulate lending

BRITAIN-BANK/   By Sumeet Desai and David Milliken
   LONDON, Sept 15 (Reuters) -  The Bank of England could cut the interest rate it pays on the reserves it holds for commercial banks to help stimulate lending and nurture what it says will be a gradual economic recovery, Governor Mervyn King said on Tuesday. (more…)

TEXT-BoE Governor Mervyn King opening statement to House of Commons Committee

BRITAIN/    LONDON, Sept 15 (Reuters) – Below is a full text of Bank of England Governor Mervyn King’s opening statement to parliament’s Treasury Committee. (more…)

Regulators need ways to stem asset bubbles -Bank of England deputy

Britain's Chancellor of the Exchequer Alistair Darling (R) and Deputy Governor of Bank of England Charles Bean attend a G7 finance ministers and central bank governors meeting in Rome February 14, 2009. LONDON, Aug 25 (Reuters) – The financial crisis has tipped the arguments in favour of central banks acting to stem asset-price bubbles but they will need new instruments to help them do this, Bank of England Deputy Governor Charles Bean said on Tuesday.


UK regulator opposes tight commodity market limits – sources

By Christopher Johnson and David Sheppard
LONDON, Aug 6 (Reuters) – The UK’s financial watchdog looks likely to resist moves towards tighter regulation on commodity markets if a meeting it held with oil industry representatives is any guide, industry sources said on Thursday.