Financial Stability
Lautenschläger says some leveraged finance practices need watching
ECB’s head of supervision notes increase in ‘covenant-lite’ deals
Dutch pension funds show signs of herding, paper says
Regulatory price of risk for different asset classes 'should be balanced', warns Dutch working paper, in light of herding behaviour
Book notes: The end of alchemy, by Mervyn King
King’s book on how to fix everything that is wrong with the financial and economic system lays out radical proposals that deserve serious consideration
Mervyn King calls for radical banking reform
Former Bank of England governor wants to curtail banks’ use of maturity transformation, putting the central bank’s lender-of-last-resort role at the heart of his new banking system
Research calls for better understanding of ML/TF risks in Islamic finance
Working paper published by International Monetary Fund warns there is ‘no common understanding’; some risks may be the same as in conventional finance, but some may not
Bank of Russia proposes regular stress tests for private sector pension funds
Russian central bank proposes making all private sector pension funds implement formal risk management plans, including monthly assessments and quarterly stress tests
Singapore mulls increasing central bank’s regulatory powers
Singapore’s parliament is considering a draft law that would expand the central bank’s regulatory powers over domestic and foreign-owned banks
Colombian inflation measures might be ‘overstating’ true level – research
Some core inflation measures are failing to filter the impact of exchange rate on prices; policy-makers must be aware of the risk of expectations losing their anchor
EBA does not object to further macro-prudential measures for Belgian banks
The European Banking Authority clears the way for Belgium’s central bank to tighten macro-prudential measures affecting housing exposures; calls for changes in regulatory framework
Mexico’s stress tests reveal some institutions remain ‘vulnerable’ in extreme scenarios
Stress tests indicate that even in adverse scenarios banking sector remains sound; some banks and investment funds are vulnerable to extreme scenarios, including interest rate adjustments
UK regulators refuse to comply with part of EU bonus cap
FCA and PRA say they will not be imposing European bonus cap rules on small firms, arguing CRD IV’s proportionality principle has not been properly applied
Paper looks at macro-prudential impact on mortgage affordability
Working paper assesses how macro-prudential policies influence the share of households that can “access and sustain” a mortgage at different loan-to-value ratios
Central American central banks move to upgrade regional payment system
Central bank governors from Central America draw up action plan, detailing faster payment times; Costa Rica to be fully integrated in ‘short space of time’
Wholesale funding shocks hit credit supply, paper finds
Shocks to securities and interbank lending markets have significant effects on banks’ supply of credit, an ECB paper finds; researchers use monthly loan data for eurozone banks
Greek governor calls for ‘bold and innovative’ action on non-performing loans
Greek economy should start a modest recovery in the second half of 2016, but the government must hit bailout programme targets and take bold action on non-performing loans, governor says
UK regulator wants banks to sell their stake in payments infrastructure
PSR says the ownership of infrastructure by a handful of banks damages competition and innovation; unveils a raft of proposals, including forcing banks to sell their interest in VocaLink
Germans have unexplained high cash preference – Bundesbank article
Germans have a much higher tendency to use cash for larger transactions, article in a first edition of a new Bundesbank publication says
UK will not ‘heal’ if pay and productivity remain ‘stuck’ – BoE deputy
Cunliffe optimistic inflation will return to target as disinflationary pressures fade, also keeping close eye on productivity
IMF urges ‘comprehensive approach’ to growth that reduces reliance on monetary policy
International Monetary Fund calls for coordinated policy response ahead of G20 meetings; policy-makers ‘must act now’ to implement strategies
Irish insurance firms face more scrutiny, supervisor says
Irish central bank’s director of insurance supervision outlines new regime; firms will have to provide more evidence to back up their claims
Sarb’s Lesetja Kganyago on divergent monetary policies and new supervision
The governor of the South African Reserve Bank talks to Christopher Jeffery about navigating divergent monetary policies, South Africa’s new supervisory regime and nurturing new talent
Lenders should reward low-risk customers – Kenyan governor
Banks should praise those performing well regarding credit management, and offer low-risk customers better terms as a result, governor says