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| 11 April 2012 |
France leans toward Volcker rule over Vickers-style reforms
French bankers noted their preference for reforms akin to America's Volcker rule as opposed to Britain's Vickers-style overhaul. As the French presidential race heats up, politicians are taking a stance as well. Francois Hollande, the Socialist presidential front-runner, prompted concerns that he might try to carve up banks' activities. However, sources close to Hollande said they are leaning away from ring-fencing. "The Vickers system is not suited to France," a Hollande source said. "It's much more the Volcker rule which we have in mind, with a clear functional separation of activities." Reuters (10 Apr.)
Commentary: Volcker rule isn't the solution
Peter Wallison, a senior fellow at the American Enterprise Institute, argues that the Volcker rule is fatally flawed, as it will weaken banks and hinder market liquidity. He argues that simplifying the rule is easier said than done, and he questions the motivation behind the rule. "So why is proprietary trading by banks now to be prohibited?" he writes. "Although Dodd-Frank was intended to prevent future financial crises, no one has yet been able to point to bank proprietary trading as a factor in weakening the banks before the 2008 financial panic." The Wall Street Journal (10 Apr.)
Europe's banks make offers to bondholders to improve position
European banks are striving to meet tougher capital rules by offering bondholders various debt instruments, a move that could shrink the debt-capital market. Financial Times (tiered subscription model) (10 Apr.)
Global investment banks' earnings bounced back in Q1
Earnings at investment banks worldwide rebounded in the first quarter amid a reprieve from the euro-zone crisis, but analysts say the situation is temporary because of long-term weaknesses in the industry. Financial Times (tiered subscription model) (10 Apr.)
Cost increases to protect Spanish debt from default
Five-year credit default swaps covering Spain's debt are rising close to a record high as the country's borrowing costs surge. CDS on Italian, Portuguese, French and German debt also widened. Greece's CDS are still not trading after a debt restructuring. The Wall Street Journal/Dow Jones Newswires (10 Apr.)
Spanish banks could use more capital, central banker says
Miguel Angel Fernandez Ordonez, governor of the Bank of Spain, said banks likely will need more capital if the economy deteriorates further. Ordonez doesn't expect a strong economic recovery in the short term. In fact, Spain is sinking into its second recession in three years, with more loan defaults expected. Reuters (10 Apr.)
"London whale" stops derivatives trades, but waves continue
JPMorgan Chase trader Bruno Iksil stopped making massive credit-derivatives bets that earned him the nickname "London whale", but hedge funds and other investors remain involved in strategies against him. Investors who bet against Iksil suffered large paper losses as he drove down a credit index. The situation made Iksil a target, sources said. "I view the entire market as a chess match playing against this guy," one trader said. The Wall Street Journal (10 Apr.)
Other News
Study: RWA divergence could be because of regulatory differences
Divergence in banks' data for risk-weighted assets could be caused by national regulators' differing approaches, a study found. "In the European Union, all internal ratings-based models are developed by banks under the supervision of regulators," said Gonzalo Gasos of the European Banking Federation, which led the study. "These supervisory practices often differ substantially, so it is time to examine them properly and seek further convergence. We believe they are the source of much of the RWA inconsistency we see." Risk.net (subscription required) (10 Apr.)
Editorial: Regulators should tame, not end, shadow banking
Regulators worldwide are voicing concerns about shadow banking, but rule-makers should focus on harnessing the activity instead of smothering it, according to the Financial Times. Financial Times (tiered subscription model) (10 Apr.)
Other News
China plans to encourage private investment in Wenzhou
Zhou Xiaochuan, governor of the People's Bank of China, supports private investment in Wenzhou's financial sector as the nation tests market liberalisation. China is looking to the experiment to establish the cornerstone of financial reforms. Reuters (10 Apr.)
Member of European Parliament Kay Swinburne will open AFME 5th Annual European Post-Trade Conference -- 16 May in London
The European Post-Trade Conference will cover 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, including:
Save the date: Bellwether Europe 2012 conference, "where Europe's capital markets meet" -- 10 May in London
Europe is facing an overwhelming burden of sovereign debt, uncertainty of impending financial regulation and the fragility of emerging-market growth. With 250 audience members, comprising borrowers, investors and other crucial market players, the Bellwether Europe 2012 conference will debate the next steps for the capital-markets industry. AFME members receive a 25% discount on the standard delegate fee, and AFME site visitors receive a 20% discount. See further details, or book your place. Blank (05 Mar.)
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