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Kostya Golovan

TEXT-S&P: U.S. shadow banking supervisory framework is emerging | Reuters - 2 views

www.reuters.com/...idUSWNA695620120510

shared by Kostya Golovan on 17 May 12 - No Cached
  • Shadow banking encompasses a wide variety and complex set of financial entities and products that may still present an important systemic risk, but it hasn't yet filled the void traditional banking has left
  • The term "shadow banking" first became prevalent in the aftermath of the financial crisis, and it lacks a universally consistent definition.
  • Shadow banking encompasses not only special-purpose vehicles that are beyond the Federal Reserve's supervision
  • ...9 more annotations...
  • but also specific instruments such as swaps, repurchase agreements, and asset securitizations.
  • However, the term can oversimplify investment vehicles and products that are complex and interact very differently with the formal banking system.
  • "Investors seem to be asking two key questions about shadow banking,
  • The first is to what extent shadow banking might replace traditional banking in the U.S. financial sector.
  • The second question is whether banking regulators will effectively and quickly implement a supervisory framework that can contain systemic risk by eliminating regulatory arbitrage and providing greater transparency.
  • will continue to operate outside the reach of regulators once the economic recovery firms up.
  • Shadow banking mimics traditional banking, though it doesn't have the protection, implicit or explicit, of a government guarantee that is available to depository institutions.
  • regulators are attempting to establish better oversight over the shadow banking sector to lower the possibility of future interventions, to reduce contagion to the formal banking sector, and to eliminate reliance on government support,
  • In fact, many of the proposed regulatory reforms aim to increase investors' risk sensitivity and better align incentives among investors, originators, and intermediaries."
  • Kostya Golovan on 18 May 12
     
    Shadow banking is explained in this article and it is put into question whether shadow banking has the ability to replace the traditional banking system. The question of regulations regarding shadow banking is also asked and whether such regulations can be quickly and efficiently implemented. Shadow banking mimics traditional banking but it lacks the protection of a government guarantee that is available to depository institutions.
stefan ayache

Hedge Funds Are Shadow Banks in Need of Regulation, Bafin Says - Bloomberg - 1 views

www.bloomberg.com/...-of-regulation-bafin-says.html

shared by stefan ayache on 17 May 12 - No Cached
  • Hedge funds act as shadow banks and should be added to the list of organizations in need of regulation
  • Germany’s financial regulator Bafin.
  • Shadow-banking definitions by the Financial Stability Board
  • ...26 more annotations...
  • are too narrow
  • Bafin is working on its own proposals to regulate the sector
  • make dodging rules more tedious and expensive
  • So-called shadow banking that takes place outside the scope of regulators is being targeted by financial watchdogs on concern that it may be used to evade a global clampdown on excessive risk-taking
  • The FSB
  • established a list of shadow-banking activities that may warrant tougher oversight
  • will seek agreement on the rules by the end of 2012
  • Authorities should know why money is deposited offshore
  • need for additional rules for derivatives
  • credit-default swaps
  • who should be allowed to sell CDS
  • purchase of the instruments should be restricted
  • the CDS market still isn’t transparent
  • tripling how much core capital lenders must hold to at least 7 percent of assets
  • how much freedom national regulators should have to go beyond minimum EU capital rules
  • Finance ministers are set to discuss the rules again at a meeting in Brussels
  • German banks that lend to local economies dominated by medium-sized companies are seeking to loosen standards for risk weighting of these loans
  • The current crises were caused by subprime and government bonds
  • force banks to hold Tier 1 capital equivalent to 3 percent of their total assets
  • would prevent lenders from accumulating assets worth more than 33 times their reserves
  • The measure is needed to stop banks from evading other capital rules
  • considering how to expand the range of assets that qualify as highly liquid
  • concerns that the current list is too narrowly focused on government debt
  • survive a 30-day credit squeeze
  • set to take effect in 2015
  • We, for example, have a huge government bond market; others don’t
Kostya Golovan

Regulators clash over 'shadow banking' behind ETFs - Citywire - 0 views

www.citywire.co.uk/...a589740

shared by Kostya Golovan on 17 May 12 - No Cached
  • Regulators are in direct conflict over how exchange traded funds (ETFs) take in ‘short-term money’ and promise instant liquidity, but can invest in long-term and less liquid assets.
  • offering immediate liquidity but are potentially raising short-term money to fund longer-term investments.
  • This concern began when regulators started worrying about money market funds…it's just deposit taking but called something different. It's taking short-term money but investing in longer-term securities.
  • ...6 more annotations...
  • the macro regulators think this liquidity transformation, as a type of ‘shadow banking’, needs regulation.
  • whole point of these vehicles is shorter-term liquidity and that investors should have more immediate access to money.
  • Ucits rules do stipulate funds must invest in liquid assets.
  • However, Gleeson and other industry experts pointed out that
  • A manager will be sanctioned if they use assets that do not have liquidity.
  • Shadow banking is positive. The danger is we regulate to the point this becomes unprofitable
  • Kostya Golovan on 18 May 12
     
    This article looks at how exchange traded funds (ETFs) take short term cash, very liquid capital, and use the funds to make long term investments. It is all well and good until the fact that ETFs are marketed as vehicles offering immediate liquidity is considered. The liquidity of ETFs is dependent on the underlying assets in which the money is invested. Therefore, regulations might be set forward ensuring that ETFs invest only in liquid assets.
Kevin Mao

Definitions - 12 views

Interest - "1. The charge for the privilege of borrowing money, typically expressed as an annual percentage rate. 2. The amount of ownership a stockholder has in a company, usually expressed as a...

started by Kevin Mao on 18 Apr 12 12 follow-ups, last by Kevin Mao on 18 May 12
Kevin Mao

Banking rules may encourage riskier trading, warns ratings agency | Business | The Guar... - 0 views

www.guardian.co.uk/...ng-rules-riskier-trading-fitch

banking rules Shadow Regulations Changes

shared by Kevin Mao on 17 May 12 - No Cached
  • 29 biggest banks in the world could be encouraged to embark on riskier trading activities
  • The 29 banks are deemed to be global systemically important financial institutions
  • agency also warned that borrowing costs for customers could rise as banks try to maintain their profitability
  • ...7 more annotations...
  • might even be a shift to the capital markets to raise funds and banks could move into the less regulated areas of finance, known as "shadow banking"
  • Banks need to meet the new capital requirements, known as Basel III and being implemented as a result of the 2008 banking crisis, by the end of 2018,
  • The impact of holding extra capital – about 23% more than their current holding of $2.5tn – could reduce returns on equity to 8.5% from the 10.8% average of the 29 banks during the period 2005-2011
  • in an effort to entice investors the banks may be encouraged to take bigger risks
  • 29 banks will in total need to find $566bn on the assumption that these crucial banks need a 10% capital cushion
  • need for extra capital will reduce the return on equity
  • If the banks did not raise equity it would take them three years to raise the extra capital
  • Kevin Mao on 17 May 12
     
    This article is about new banking rules that may encourage riskier trading.
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