Hedge funds act as shadow banks and
should be added to the list of organizations in need of
regulation
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Hedge Funds Are Shadow Banks in Need of Regulation, Bafin Says - Bloomberg - 1 views
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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
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German banks that lend to local economies dominated by medium-sized companies are seeking to loosen standards for risk weighting of these loans
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Are low interest rates causing low savings rates? | Fox Business - 0 views
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recent study found that nearly half of American workers are not contributing to any form of retirement plan.
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People who fail to save money will pay for their short-sightedness in the future, but the decline of savings can also be seen as a logical response to a low-interest-rate environment
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average personal savings rate in the U.S. slipped to 3.9 percent in the first quarter of 2012 -- the lowest level in over four years
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With interest rates running well below the rate of inflation, money in a savings account or other deposit vehicle is actually losing purchasing power with each passing day
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Bond yields are not much higher, and stocks haven't been very rewarding so far in the 21st century either
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However, getting the most for your money is only one consideration. Having resources to support your retirement is also an important function of saving, and in this respect people with low savings rates are not behaving rationally.
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while low interest rates may seem to discourage saving money, they actually make it more imperative.
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other important point of this context is that outside of the government, most people no longer have an employer pension plan to fall back on.
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shift from defined benefit to defined contribution retirement plans put the responsibility for saving solely on the employees
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by choosing more immediate consumption over saving for retirement, people are supporting their current lifestyles at the expense of the future.
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JPMorgan's Trading Loss Is Said to Rise at Least 50% - 0 views
dealbook.nytimes.com/...ss-is-said-to-rise-at-least-50
banking America NYtimes JP Morgan derivatives
shared by kevinan108 on 18 May 12
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The trading losses suffered by JPMorgan Chase have surged in recent days, surpassing the bank’s initial $2 billion estimate by at least $1 billion, according to people with knowledge of the losses.
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In March, the company raised the quarterly dividend by 5 cents, to 30 cents, which will cost the bank about $190 million more this quarter.
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At the bank’s annual meeting in Tampa, Fla., on Tuesday, Mr. Dimon did not definitively rule out cutting the dividend, although he said that he “hoped” it would not be cut.
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“JPMorgan Chase has a big hedge fund inside a commercial bank,” said Mark Williams, a professor of finance at Boston University, who also served as a Federal Reserve bank examiner. “They should be taking in deposits and making loans, not taking large speculative bets.”
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In its simplest form, traders said, the complex position assembled by the bank included a bullish bet on an index of investment-grade corporate debt, later paired with a bearish bet on high-yield securities, achieved by selling insurance contracts known as credit-default swaps.
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The trading losses suffered by JPMorgan Chase have surged in recent days, surpassing the bank's initial $2 billion estimate by at least $1 billion, according to people with knowledge of the losses. When Jamie Dimon, JPMorgan's chief executive, announced the losses last Thursday, he indicated they could double within the next few quarters.
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China's easing aimed at housing market - MarketWatch - 0 views
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The People’s Bank of China announced on Saturday it plans to lower then the ratio of reserves bank must set aside as deposits at the central bank by a half percentage point, effective Friday.
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Investment in real estate was up 18.7% in the first four months of the year, cooling significantly from a 23.5% gain in the first three months of the year, according to official figures released Friday. The data weren’t broken down on a monthly basis.
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The numbers indicated property developers were cutting back on land purchases, with outlays on sites of 182 billion yuan ($28.81 billion) in the January-to-April period, a drop of nearly 14% from a year earlier.
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Standard Chartered said developers’ concerns over the property market were reflected in data showing residential investment hitting the wall in April, growing just 4% during the month, compared to a 15.1% year-on-year rise in March.
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Regulators clash over 'shadow banking' behind ETFs - Citywire - 0 views
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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.
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offering immediate liquidity but are potentially raising short-term money to fund longer-term investments.
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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.
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the macro regulators think this liquidity transformation, as a type of ‘shadow banking’, needs regulation.
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whole point of these vehicles is shorter-term liquidity and that investors should have more immediate access to money.
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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.
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Spain banking sector shaken by report of bank run | CanadianBusiness.com - 0 views
www.canadianbusiness.com/...r-shaken-by-report-of-bank-run
Spain EuropeanCrisis banks banking nationalization runonbanks
shared by kevinan108 on 17 May 12
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Confidence in Spain's banks and its teetering economy was shaken Thursday after a newspaper reported that depositors were rushing to withdraw their money from Bankia, a troubled bank that was effectively nationalized just one week ago.
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Political turmoil in Greece has increased the likelihood that it could leave the 17-country monetary union, a move that could have ripple effects throughout Europe and the world's financial markets.
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Bankia SA, the country's fourth-largest lender, saw its shares fall as much as 27 percent during trading in Madrid after the El Mundo newspaper reported the bank was hit with more than €1 billion ($1.27 billion) of withdrawals since the government announced the takeover.
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Greek president Karolos Papoulias warned party leaders during unsuccessful coalition talks that about €700 million ($898 million) in deposits have flown out of Greek banks since the May 6 elections, according to a report from Greece's central bank governor, George Provopoulos
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the interest rate on Spanish 10-year bonds stood at a worryingly high 6.29 percent. It has risen sharply from below 5 percent in March and is edging toward the 7 percent mark that is considered unsustainable in the longer term.
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Banking regulations cost more than they deliver | Mail Online - 2 views
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It must be the evil capitalists, they suggested, and not Labour's appalling spending record that was to blame for Britain's struggling response to the recession.
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worrying tendency to meet recession with excessive regulatory response to banks, in order to justify taxpayer-funded bailouts.
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Where banks are concerned, regulatory responses are often commercially restricting, difficult to comply with, and ineffective in lowering commercial risk.
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Apart from restricting credit through profit loss on regulatory compliance, it may also result in the shift of risk to general credit transactions, as banks seek to recoup profits lost from overregulated areas such as hedging products.
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On the back of the J.P. Morgan's billion dollar losses, there is now a temptation in the EU to pass a measure similar to the Volcker rule in the U.S Dodds-Franck Act.
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The Volcker rule, in the U.S., prevents banks from using additional profits on deposits for a high-risk bet strategy
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Banks have made it clear that this sort of regulation is difficult to comply with, as bet-style transactions and a pure hedge are very difficult to distinguish
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These seek to distinguish between retail and other banking operations, and to increase reserves in banks to protect the taxpayer.
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One might observe that the inflationary costs of low interest rates to encourage lending, and over-regulation that effectively reduces it (and also comes with public-sector administrative costs) are not exactly compatible on principle.
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It would be better for banks to crash and burn where they deserve to, and for governments not to get involved in second-guessing market risk, through unworkable regulation, for political gain.
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Further, politicians ought to realise that the best way to protect the taxpayer is not to get involved in bailouts at all.
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The banks are apparently being over-blamed in the causation of the worldwide economic crisis by politicians. They are using the hype of the economic crisis in their favor and assigning all the blame to the banks which is in turn now leading to increases in regulations over the banking industry. Over-regulation will hurt the banking industry by reducing the number of option and easy with which they can utilize their money.