Vote could affect reintroduction of Irish bonds | Spanish banks might need to set aside more capital | French housing bubble could pop, analysts warn
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27 April 2012
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News on the global financial markets

Morning Bell
EU considers easing Basel III to be in line with other regions
EU lawmakers are considering relaxing Basel III capital and liquidity rules for banks if lenders in the US and elsewhere are not subject to their full force. Othmar Karas, the EU lawmaker guiding Basel III adoption through the European Parliament, suggested that the European Commission and the European Banking Authority receive powers to "take appropriate measures in order to adjust to the level of global competition". Bloomberg (26 Apr.)
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Industry News
Vote could affect reintroduction of Irish bonds
The Irish will vote in May on a fiscal treaty in Europe. If it is rejected, which appears possible, Dublin's plans to rejoin overseas bond markets could be in jeopardy. Financial Times (tiered subscription model) (26 Apr.)
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Spanish banks might need to set aside more capital
Spanish banks have put aside €112 billion since 2008 as a cushion against loan losses. The government had hoped this would quash concerns about lenders' health. But data suggest more capital might be needed to absorb losses on mortgages. "People just do not believe the numbers," one analyst said. "There has been a lot of 'extending and pretending'." The Economist (free content) (28 Apr.)
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French housing bubble could pop, analysts warn
The next bubble to burst might be France's housing market, Danske Bank analysts wrote in a market note. They said this might happen if investors start to think fundamental weaknesses in Spain are bleeding into France or if the European Central Bank increases interest rates. French housing prices declined marginally during the financial crisis and started to turn around in 2009. They hit an all-time high in the third quarter of 2011, up 121% since 2000. CNBC (26 Apr.)
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Deutsche Bank CFO praises ECB's long-term refinancing operation
Deutsche Bank Chief Financial Officer Stefan Krause said there should be "no stigma" for banks that accepted cheap three-year loans from the European Central Bank. "Initially, we were a little bit concerned as to whether this would identify banks that have liquidity problems," Krause. "But I must say it has worked great and it was a great initiative that has helped banks become better." CNBC (26 Apr.)
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Commentary: Goldman's focus will remain on making money
Goldman Sachs has faced significant scrutiny for its practices in recent years, but the firm's focus on the bottom line has allowed its board to overlook some concerns, columnist David Weidner writes. "For all the noise about Goldman -- pressure on its board, governance practices, the Greg Smith resignation fiasco, to name just three examples -- the reality is that if any overhauls are delivered at the company's shareholder meeting next month, it will be because Goldman has lost its knack at making money," Weidner writes. The Wall Street Journal (tiered subscription model) (26 Apr.)
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Other News
Regulatory Roundup
FSA's Turner will discuss solutions to euro-zone crisis
Adair Turner, chairman of the UK Financial Services Authority, is scheduled to give a speech today in Dublin to discuss ideas for resolving Europe's sovereign-debt crisis. Turner is expected to suggest that Europe's war chest be used to help troubled financial institutions and improve investor confidence in the short term. Fundamental solutions, such as issuing eurobonds, will take time, according to Turner. Reuters (27 Apr.)
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BoE's Tucker takes aim at shadow banking
Paul Tucker, deputy governor of the Bank of England, said at a European Commission conference that regulators should have authority to require more collateral on financial transactions. "The authorities should be able to step in and set minimum haircut or margin levels for the collateralised financing markets, or segments of them," he said. Tucker and other regulators are looking at ways to rein in shadow banking. Reuters (27 Apr.)
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Analysis: US remains a hurdle to aligning accounting rules
More than 100 countries use the International Accounting Standards Board's guidelines, but the US remains reluctant to sign on. The IASB's US counterpart, the Financial Accounting Standards Board, has been trying to align its rules with those of the IASB, but the effort continues to run into problems. Group of 20 finance ministers gave the boards until mid-2013 to align their rules. Reuters (26 Apr.)
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Analysis: Financial-transaction tax is problematic
The EU's proposed financial-transaction tax has been moving forward and could gather momentum during the French presidential election, because both major candidates are for it. However, the tax faces challenges and likely would have unintended consequences, such as driving trading out of countries that implement it. European Central Bank President Mario Draghi recently reiterated this point before the European Parliament. "We want them to come back," Draghi said. "One wonders if an FTT is the best way to attract them back to euro area." The Economist (free content)/Schumpeter blog (26 Apr.)
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Spotlight on China
Geithner presses China to proceed with financial reforms
As US Treasury Secretary Timothy Geithner prepares for meetings in Beijing next week, he encouraged China to continue with financial reforms. He said that if China proceeds on key issues, the US will open up its markets to the Asian nation. "We are willing to continue to make progress on these issues, but our ability to do so will depend in part on how much progress we see from China on issues that are important to us," Geithner said. Reuters (26 Apr.), Google/The Associated Press (26 Apr.), The Washington Post (tiered subscription model) (26 Apr.)
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Other News
Less than 3 weeks to go before the AFME Fifth Annual European Post-Trade Conference -- 16 May in London
The European Post-Trade Conference will cover all crucial developments in the post-trade space and their impact on the industry, including regulation of central securities depositories, TARGET2-Securities, legal-entity identifiers, interoperability and extraterritoriality. The event is an essential, annual gathering for post-trade professionals to receive updated information from leading European speakers and to network with senior operations executives, market-infrastructure executives, senior regulators, policymakers and providers. We are looking forward to welcoming Verena Ross, executive director of the European Securities and Markets Authority, and Kay Swinburne of the European Parliament Economic and Monetary Affairs Committee, who will give keynote speeches at the conference. Register!
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