Macro-prudential
Book notes: Achieving financial stability and growth in Africa, edited by Stephany Griffith-Jones and Ricardo Gottschalk
John Chown praises this comprehensive review that studies the possibility of achieving ‘the impossible’ in low-income Africa – both growth and financial stability
RBA seeks to gain ‘additional’ insight into wages – Lowe
Central bank teams up with statistical agency to gain insight into declining wage patterns; frequency of wage increases is decreasing, says RBA governor
Foreign investment ‘restored’ exchange rates after policy shocks – paper
Data from Colombian central bank shows foreign exchange intervention have “short-lived effects” on prices; over the medium term, foreign capital flows push exchange rate back to original level
Basel Committee outlines plans for ‘fundamental change’ of IFRS 9
Task force to consider impact of expected credit loss approach on regulatory capital, while consultation lays out interim plans
Coen seeks to quell European fears on Basel III
European parliament members accuse Basel Committee of favouring US over European banks; William Coen says “Basel process” is transparent and not dominated by any one interest
Top US and EU officials hold resolution war game
US, UK and eurozone central bankers, regulators and politicians participate in an exercise designed to improve the co-ordination of cross-border resolution
European Commissioner cautions US on TLAC rules
Dombrovskis says foreign banks should not be mistreated by Fed internal TLAC proposal
Low growth and low rates to hit financial stability, says IMF
Weak outlook is likely to feed into medium-term problems for financial stability, fund warns; Basel Committee may have to delay agreement on final framework
Book notes: Connectedness and contagion, by Hal Scott
Scott’s argument on the dangers of contagion has many appealing features, although he may be too eager to hand powers to unelected officials, writes Michael Reddell
BoE paper examines how US banks lend after hurricane shock
Local banks may play an “important role” in a geographically integrated banking system, paper says, despite their greater vulnerability to financial constraints
Independence, liquidity and a level playing field – yet another impossible trinity?
Jesper Berg warns it will likely be impossible to balance the demands of monetary policy independence, liquidity standards and achieving fairness for all banks
BIS research tests leverage ratio with adjusted DSGE model
Authors design a model with both leverage ratio and variable risk-weighted capital requirements, finding a range of benefits to constraining leverage
Time to focus on green finance as Paris Agreement set to enter into force
Central bankers meeting at the IMF next week will discuss mechanisms to unleash private capital for green finance ahead of a Paris climate deal that could enter into force before 2017
Central banks must do more on green finance – UN report
Current progress is not enough to deliver long-run stability; central banks should work with other stakeholders to align the financial system with climate change goals, UN report says
PRA tightens standards for buy-to-let market
“Interest coverage ratio” and affordability stress tests to be implemented by January 2017, while remaining measures must be implemented by September 30
Better swap lines could support global co-operation – BIS’s da Silva
Improving the global network of swaps, particularly between advanced and emerging economies, could create a more stable system, deputy general manager says
BoE’s Salmon warns forex industry on adherence
Chris Salmon, the Bank of England's executive director for markets and lead on global code adherence, says regulation could be on the horizon as soon as 2020 if market participants don't adhere to the new Global Code
Fed’s Tarullo: stress testing needs to evolve
Fed is planning to toughen its stress-testing framework with better alignment with regulation and incorporation of dynamic “amplification” effects – though more research is needed
Stress tests should consider wider range of resilience metrics – BoE article
Metrics including liquidity and funding resilience should be considered as stress tests become an important part of a central bank’s regulatory toolkit; current liquidity and funding stress scenarios are “less advanced”
Markets back under central bank ‘sway’ – BIS quarterly review
Recent equity rally is “more stick than carrot”, says Claudio Borio, as latest report points to fresh signs of discomfort among banks and continued market distortions
Andrew Bailey warns of macro impact from pensions trouble
FCA chief says low interest rates and other factors shaping the pensions market are likely to have knock-on effects on the economy, though the area is not well understood
National Bank of Denmark warns of growing bubble in Copenhagen
Report says housing market in country as a whole looks relatively stable, but Copenhagen’s market is close to the danger zone, following first “statistical bubble test”
Bank of Slovenia introduces macro-prudential measures for housing market
Slovenia’s central bank has recommended lenders impose loan-to-value and debt service-to-income ratios on all new housing borrowers
Largest banks meet Basel III capital standards – BIS and EBA
Banks have improved capital and liquidity ratios, reports note, but methodology may differ from that used by industry