Financial Stability
Irish credit unions still face challenges, regulator says
Ireland’s credit union sector faces ‘significant challenges’ despite recent improvements, with numbers of institutions under loan restrictions ‘far too high’, central bank regulator says
‘Decarbonisation’ could allow investors to hedge climate risks, economists say
Economists claim low-carbon index can deliver similar performance to benchmark indexes while hedging the uncertain timing of climate change policy-making
Responses to commodity shocks only have ‘small’ impact on investment, paper finds
Flexible inflation-targeting frameworks and exchange rates are ‘essential’ to limit the macroeconomic impact of commodity price volatility
Bank of Russia holds after oil prices enter ‘risk scenario’
The falling oil price puts Russia at increased risk of recession while inflationary pressures grow, the Bank of Russia says, as it keeps its policy rate unchanged
Floating exchange rate has led to more volatility, Norwegian paper says
Moving to inflation targeting regime prompted rise in volatility in nominal exchange rates, research says; no depreciation or appreciation trends evident, however
Severely adverse scenario will now include ‘more severe downturn’ for US
Severely adverse scenario will now include ‘more severe downturn’ in the US economy; two new BHCs will take part, bringing total number to 33
BoE reveals final element of ring-fencing framework
Systemic risk buffer will apply to ring-fenced assets, with the aim of preventing banks amplifying stress; BoE also hopes it will give smaller banks a competitive boost
Haircuts on sovereign debt ‘open the door for more leverage’, research finds
Prolonged low interest rates also contribute to an overleveraged economy in case of crisis; though in times of ‘low crisis’ they can help decelerate fiscal adjustment
BIS paper finds investors take simplistic approach to emerging market risks
Authors find investors seem to divide countries based not on fundamentals but on whether they are deemed an emerging market
BoE’s Woods says Solvency II not a revolution
Executive director at the Bank of England examines historical changes in insurance regulation, concluding the introduction of Solvency II is in line with existing philosophy
Parliamentary enquiry criticises Irish central bank
The Central Bank of Ireland failed to address issues in the country’s banking sector with its ‘light touch’ regulation, an Irish parliamentary report finds
Bank of England prepares to overhaul ageing RTGS system
Central bank will spend year outlining plans for replacement to high-value payments system, keeping an open mind at present as to what features it should have
Dutch paper explores price level dispersion
‘Idiosyncratic shocks’ have greater impact on price level dispersion within the eurozone than in the US, authors say
BoE’s Bailey sets sights on balance sheet clarity
Clear disclosure of creditor hierarchies will be ‘critical’ moving forward, says Andrew Bailey; clarity in bank balance sheets is a ‘good thing’
BoE’s Forbes weighs up varying policy paths in US and UK
Bank of England MPC member Kristin Forbes sees ‘striking’ similarities between the countries’ labour markets, but this does not necessarily mean the same policy is appropriate
Andrew Bailey agrees to lead FCA
PRA chief executive accepts top job at UK’s other financial regulator after being asked to take the role, but may not make the move for some months
Carney says supervisors must improve understanding of electronic trading
BoE officials say work is progressing on understanding the risks and impact on ‘system dynamics’ caused by rise of electronic trading, but emphasise it is not all bad
Research analyses Irish banks’ connections to global financial system
An article in the latest Central Bank of Ireland quarterly bulletin maps the networks formed by Irish banks’ connections to each other and to the global financial system
Kosovo’s ELA rules are ‘major improvement’, say IMF staff
Central Bank of the Republic of Kosovo adopts regulation setting out the conditions for emergency fund provision; staff at IMF welcome the additional ‘detail and rigour’
Cyprus on track to complete programme by March, finance minister tells MEPs
Cyprus will continue with fiscal discipline and market-orientated reforms once adjustment programme ends, finance minister tells European parliament; rejects ‘tax haven’ claims
Banque de France governor wants public reforms
France must cut its public debt and reform its labour market, says Francois Villeroy de Galhau; the governor also calls for new investment products
ECB’s Cœuré calls for new attitude to liquidity
Liquidity in the European banking system should not return to its pre-crisis levels, Benoît Cœuré tells a Davos audience; CMU offers chance to fix problems which caused crisis, he adds
Revised Basel III better reflects bank risk, research finds
Study says 2013 capital rules more in line with actual risk, but can be easily gamed
Weidmann says clearer liability would strengthen eurozone
Bundesbank chief says important element of fixing the eurozone’s ills is reinstating the ‘principle of liability’, instead of resorting to bailouts