Macro-prudential
Fed authors construct ‘financial stability sentiment’ index
Index derives sentiment from central bank financial stability reports, finding a drop in sentiment tends to precede a “significant deterioration” of financial indicators
Bank of England launches first ‘exploratory’ stress test
BoE will assess banks’ longer-term resilience to periods of stagnation; cyclical test made tougher
BoE’s FPC sounds warning on implementation of global standards
FPC cautions on global co-operation around regulatory standards; follows plans for deregulation in the US and tit-for-tat threat from German regulators
Book notes: Competition and Stability in Banking, by Xavier Vives
Xavier Vives has written a fascinating book that highlights many important issues in banking regulation. But there are some flaws in his argument
SEC nominee flip-flops on Dodd-Frank rollback
Rules mandated by statute must be adopted by regulators, Clayton concedes
CEPR report ‘cautiously optimistic’ on bail-in
Thomas Philippon and Aude Salord find range of issues with European bail-in rules, but say they can probably be fixed; Cyprus bail-in “terribly” executed but still worked
Norges Bank paper offers method of stress testing with fire sales
Model recognises possibility of indirect exposures, which could affect outcome of bank stress tests
BoE’s PRA should clarify approach to insurance, report says
Report asks Prudential Regulation Authority to review boundaries of “policyholder protection”, warning the regulator not to stray into the FCA’s territory
Carney warns of fading regulatory momentum
“Nascent risks” could threaten progress made so far if lawmakers and regulators give in to “reform fatigue”, the FSB chairman says
PBoC working to rein in shadow banking risks
Central bank is toughening its regulatory stance and tightening interbank liquidity as shadow banking products proliferate
Policy intervention helps economies escape ‘stagnation traps’ – paper
Research published by ECB explains how “pessimistic expectations” can lead to low employment and growth, dampening investment; countercyclical subsidies could be the answer
RBA’s Bullock says central banks are ready to ‘take action’
Old school of thought regarding asset bubbles abandoned following financial crisis; macro-prudential tools are helping policymakers “clean up”
Foreign bank branches show more volatile lending – Norges Bank commentary
Foreign branches may be subject to lower capital requirements, giving them a competitive edge but also making their lending growth more volatile
BIS authors spot structural break in bank financing
Research identifies turning point in how banks fund themselves around 2008, with greater reliance on branches and subsidiaries
RBNZ to rethink capital requirements
Review will reassess country’s approach to Basel III implementation, after Australia decides to bolster its banks’ capital to be “unquestionably strong”
BoE paper isolates loan supply impact of credit crunch
“Rich, tailor-made data set” informs study of how pre-crisis bank lending characteristics may have impacted post-crisis credit supply
Basel capital surcharges are too low – Fed paper
Authors argue current Basel standards are not enough to guard against the failure of a global bank, particularly those reliant on short-term funding
EC: regulators could adapt rules to protect bond liquidity
Official recognises regulatory hit to corporate bond and repo markets, but rejects Mifid delay
Tax cuts affect bank leverage and liabilities – BIS paper
Tax cuts have different effects on different banks, authors find; better-capitalised banks increase their assets, while weaker ones clean up their balance sheets
Booms spill over less than busts – Riksbank paper
Financial booms appear to affect the real economy less than busts, suggesting macro-prudential policies will outperform “leaning against the wind”
RBI’s Acharya says India ‘urgently’ needs asset management company
New deputy governor says stressed assets must not be allowed to “fester”, sketching two possible designs for an asset management company
Kuroda flags need for better network of emergency forex liquidity
Bank of Japan governor warns network of swap lines among major central banks may not be enough as systemic banks reach into a broader set of regions
Basel III has aided system stability, interbank models suggest
Model predicts future crashes will not be total wipeout
Only struggling banks cut lending to raise capital ratio – IMF paper
Study of Eastern Europe says banks' strategy matters when it comes to assessing the impact of Basel III; only banks with low profitability cut lending to meet requirements