A fight for survival
During the turmoil of the past two years, there has been no shortage of institutions fighting for survival. In the financial sector, undoubtedly the biggest casualty was Lehman Brothers, while several other major dealers in Europe and the US were either forced into mergers or to go cap in hand to their governments to keep them afloat.
And as our feature this month on the toxic asset situation afflicting smaller US banks reveals, the rate of bankruptcies for FDIC-insured institutions is at its highest level since the Savings & Loans crisis.
With no little irony, the latest group of institutions facing a fight for survival are financial regulators. The new coalition government in Germany has reportedly agreed on proposals that will hand ultimate responsibility for oversight of financial institutions and markets to the central bank, the Bundesbank, rather than being split between the Bundesbank and the other financial supervisory authority, BaFin.
This follows on from July’s announcement by the Conservative Party in the UK that it will shut down the Financial Services Authority and hand all regulatory powers back to the Bank of England should it, as most pundits and bookmakers expect, win the next General Election.
The logic behind both proposals is simple. The financial crisis exposed the room for gaps to occur in systems overseen by multiple regulators. To address this, central banks are more familiar with the daily operations of banks and are best placed to identify potential asset bubbles, excessive leverage and liquidity problems developing in the system. The Bank of England warned on numerous occasions leading up to the crisis that a sharp correction was coming, but in the bull years it lacked the necessary powers to rein the banks in.
All that seems set to change. Only time will tell whether an era of all-powerful regulators will prevent, or help minimise, the damage caused by future crises. But at the very least, we will know who the buck stops with.
If you do have any comments on a particular article or want to make suggestions on the issues we need to cover, do not hesitate to contact me at rob.davies@incisivemedia.com.
Rob Davies
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Structured products
A guide to home equity investments: the untapped real estate asset class
This report covers the investment opportunity in untapped home equity and the growth of HEIs, and outlines why the current macroeconomic environment presents a unique inflection point for credit-oriented investors to invest in HEIs
Podcast: Claudio Albanese on how bad models survive
Darwin’s theory of natural selection could help quants detect flawed models and strategies
Range accruals under spotlight as Taiwan prepares for FRTB
Taiwanese banks review viability of products offering options on long-dated rates
Structured products gain favour among Chinese enterprises
The Chinese government’s flagship national strategy for the advancement of regional connectivity – the Belt and Road Initiative – continues to encourage the outward expansion of Chinese state-owned enterprises (SOEs). Here, Guotai Junan International…
Structured notes – Transforming risk into opportunities
Global markets have experienced a period of extreme volatility in response to acute concerns over the economic impact of the Covid‑19 pandemic. Numerix explores what this means for traders, issuers, risk managers and investors as the structured products…
Structured products – Transforming risk into opportunities
The structured product market is one of the most dynamic and complex of all, offering a multitude of benefits to investors. But increased regulation, intense competition and heightened volatility have become the new normal in financial markets, creating…
Increased adoption and innovation are driving the structured products market
To help better understand the challenges and opportunities a range of firms face when operating in this business, the current trends and future of structured products, and how the digital evolution is impacting the market, Numerix’s Ilja Faerman, senior…
Structured products – The ART of risk transfer
Exploring the risk thrown up by autocallables has created a new family of structured products, offering diversification to investors while allowing their manufacturers room to extend their portfolios, writes Manvir Nijhar, co-head of equities and equity…