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BCM International Regulatory Analytics wrote a new blog post titled The Risk Telescope — IMF Firewalls and Political Math
​Today’s issue of The Risk Telescope focuses on the political math supporting the IMF’s expanded firewall facilities, relying heavily on pie charts and tables.  The conclusion is that the firewall is neither as large nor as solid as initial media and official statements suggest.  Moreover, by potentially over-reaching on the rhetoric in order to generate good headlines, the process may be raising expectations about the capacity of the IMF or the euro area to meet near-term needs without more drama. Section II assesses the FSB’s latest progress report to the G20 and the prospects...
2706 days ago
BCM International Regulatory Analytics wrote a new blog post titled Validation
Six months ago, clients and subscribers to The Risk Telescope were alerted to building centrifugal forces placing pressure on global and euro area economic integration that took generations to build.  Six months ago as well, clients and subscribers to The Risk Telescope were alerted to looming supply and demand pressures in the high-rated sovereign bond sector.  At the end of the year, The Risk Telescope dubbed 2012 as the “year of living dangerously” and explained why.  Yesterday, the IMF’s Global Financial Stability Review validated this analysis in chapters 1, 2, and 3....
2710 days ago
BCM International Regulatory Analytics wrote a new blog post titled The Risk Telescope — Delhi, Copenhagen & DC
On opposite sides of the world in the last 24 hours global leaders laid out their respective visions for the trajectory of global economic policy.  Leaders from Brazil, Russia, India, China and South Africa met in New Delhi yesterday and issued the “Delhi Declaration.”  EU and eurozone leaders (and their finance ministers) met in Copenhagen, and Eurozone leaders issued a statement today.  In between, physically and philosophically, sit the International Monetary Fund (IMF) and the United States.  Last week, the two key U.S. policymakers responsible for IMF and G-20 leadership at the...
2730 days ago
BCM International Regulatory Analytics wrote a new blog post titled The Risk Telescope — The Day After
A collective sigh of relief is nearly audible this weekend.  At least one set of contractual obligations (credit default swaps) will be honored on time, in full, and in the manner anticipated when the contracts were written.  The months-long anticipation of this event, paired with generous (3-year) bank liquidity support by the European Central Bank and the direction of official sector support for European banks through the second bailout for Greece, means that paying out on these contracts will not be as catastrophic as would have been the case last year. The largest sovereign default in...
2749 days ago
BCM International Regulatory Analytics wrote a new blog post titled The Risk Telescope — Mexico City Ministerial Outcomes
One day, when the history of the G20 is written, the G20’s first Mexico ministerial will be remembered as the meeting when the emerging markets stood with the United States to ask Europe please to stand behind the eurozone construct with real money, not guarantees or promises or endless talks.  But today and tomorrow the headlines will largely focus on practical reality: no real decisions have been taken.  Decisions have been delay until mid-March, mid-April (after crucial decisions on Greece’s second bailout must occur) and June.  Regular readers of G20 Communiques will recognize artful...
2762 days ago
BCM International Regulatory Analytics wrote a new blog post titled The Risk Telescope — G20 Preview
Once upon a time, the G20’s ambitions were expansive.  The London, Pittsburgh, Toronto, and Seoul summits were premised on a belief that a second Bretton Woods moment had appeared.  Policymakers united in fear found consensus on reform measures relatively easily. How the world has change.  2012 opens with the world’s major economies increasingly on divergent pathways and with starkly different economic growth prospects. Consensus is harder to reach.  Implementation momentum is waning. This weekend in Mexico City, Group of Twenty (G20) finance ministers and central bank governors will...
2765 days ago
BCM International Regulatory Analytics wrote a new blog post titled The Risk Telescope — Credit Rating Agency Regulation
Finance is filled with informational asymmetries.  Lenders have more information about their borrowers than outsiders (assuming the lenders have done their due diligence).  Regulators have more information about the banks they oversee than outsiders (including shareholders).  Periodic abuses of those informational asymmetries over the decades has led to a range of regulatory requirements designed to increase transparency and level the playing field among different types of agents that require access to information in order to make good decisions.   Investors lending through bond markets...
2796 days ago
BCM International Regulatory Analytics wrote a new blog post titled The Risk Telescope — The Great Schism Part II
Earlier this month, The Risk Telescope dissected The Great Schism in Brussels.  It suggested that persistent bickering between the U.K. and its EU partners on technical financial services issues seemed likely and that the latest eurozone plan seemed destined to fall short. Since then, various key financial regulations have failed to complete the EU legislative process due to lack of agreement with the UK.  The donation package for the IMF has failed to reach its stated target funding amount, and it is unclear whether all donating members will be able to complete internal political processes...
2820 days ago
BCM International Regulatory Analytics wrote a new blog post titled The Risk Telescope
For the last two and a half years, the eurozone crisis has been mostly a regional affair.  The great questions of the day revolved around: (i) whether (and then when and under what conditions) fiscal union might occur; (ii) which countries might be most likely to exit; and (iii) what kind of financial resources Europe would be willing to devote to resolve its deepening crisis. Part I of this publication (issued today) focuses on the political and economic dynamics in Europe.  It analyzes the adequacy of the answers to those questions in the Euro Area Statement(s).  It suggests that none of...
2839 days ago
BCM International Regulatory Analytics wrote a new blog post titled The Risk Telescope — The IMF and the Eurozone
We stand today at the threshold of a massive event horizon.  The decisions taken by policymakers internationally before year-end will define the scale and scope of the fallout from the Eurozone.  They will also lay the foundations for how financial systems (e.g., risk pricing formulas; risk management systems; regulatory oversight functions) will operate in the future. We do not yet know exactly how the Eurozone sovereign bond crisis and fiscal union arrangements will be resolved.  The details are unclear and remain subject to political negotiation tonight as the U.S. Secretary of the...
2846 days ago
BCM International Regulatory Analytics wrote a new blog post titled European Institute Speech
On 25 October 2011, I had the honor of giving a speech to the European Institute in Washington,  DC.   At the time, I thought it was a rather gloomy speech.  It turns out it presented the best case scenario.  Having been asked by some for hard copies of the text, I post it here for others to see as well.
2876 days ago
BCM International Regulatory Analytics wrote a new blog post titled The Risk Telescope — Disarray & Dissonance
At the end of a wild  week, we are arguably worse off than we were on Monday: German Chancellor Merkel has publicly admitted little investor appetite exists for the European Financial Stability Facility (EFSF) bonds, even with a sovereign guarantee.  Reports indicated that Germany also rejected increased involvement by the IMF in the EFSF. Greece famously flirted with engaging the democratic will of the people through a referendum and negotiating yet concessions from banks, then backed off when it looked like such a move would jeopardize the flow of funds from the eurozone and the IMF to...
2876 days ago
BCM International Regulatory Analytics wrote a new blog post titled The Risk Telescope — Band-Aids and Beliefs
What a relief.  Sufficient political will exists to continue using the euro and working together in Europe.  Sufficient political will exists to permit major European banks to continue functioning.  Sufficient political will now exists to transfer yet more authority to the European Commission and create more Brussels-based administrative infrastructure to support yet another EU-level President.  European policymakers once again reward optimists with fine statements and perennially incremental progress towards a more unified Europe. We have seen this show before.  Relief that the world is not...
2885 days ago
BCM International Regulatory Analytics wrote a new blog post titled The Risk Telescope — G20 outcomes analyzed
Rome is burning (but not as badly as London did in August), 951 cities in 82 countries see large protests against capitalism and finance, and the eurozone faces a growing crisis.  The Financial Stability Board (FSB) released a report a few days ago stating clearly that OTC derivatives reforms are at best delayed and at risk of not being implemented as anticipated. Yet G20 finance ministers and central bank governors never once used the word “concern” (or any related derivative) in today’s statement.  Their two-page statement lists an impressively broad range of technocratic agreements and...
2896 days ago
BCM International Regulatory Analytics wrote a new blog post titled The Risk Telescope — Playing for Time
This morning’s news from Brussels might lead readers initially to believe that yet another issue of The Risk Telescope would be devoted to the deteriorating economic situation in Europe.  Instead, the telescope turns its lens to another important meeting that occurred yesterday in Europe and whose decisions have been lost amid the noise of the news cycle.  Welcome to the technocratic world of the FSB, where regulatory policy, economic policy, and central banking policy are made. Yesterday’s FSB statement presents a grab-bag of initiatives familiar to regulatory policy advocates.  It promises...
2908 days ago
BCM International Regulatory Analytics wrote a new blog post titled The Risk Telescope — Apollo 13
In April of 1970, the secondary oxygen tank on Apollo 13 exploded as it orbited Earth with three astronauts on board.  The explosion damaged the primary oxygen tank as well as the life support systems for the ship.  Astronauts evacuated to the attached lunar landing module and awaited a solution from Mission Control on the ground, while life support systems slowly depleted.  Those who have seen the movie chronicling these events will remember the scene on the ground.  Engineers had four days to devise a solution that would bring the astronauts back down to Earth alive.  They were given a bag...
2916 days ago
BCM International Regulatory Analytics wrote a new blog post titled The Risk Telescope — The Crucible
The world remains transfixed and troubled by the continued drama surrounding the eurozone and its sovereign debt issues.  The scale of the problem has managed successfully to push the similarly troubling U.S. budget stalemate off the media agenda, at least temporarily. This issue of The Risk Telescope assesses the global regulatory and economic policy implications associated with Europe’s growing crisis.  Two main implications present themselves as of this writing: 1.  The great rebalancing is underway.  The deteriorating situation in Europe is accelerating global economic rebalancing without...
2927 days ago
BCM International Regulatory Analytics wrote a new blog post titled The Risk Telescope — Jackson Hole Analyzed
Markets and pundits worked up quite a froth last week, fixated on what Federal Reserve Board Chairman Ben Bernanke might (or might not) say in his opening address to the invitation-only global central bankers conference hosted in Jackson Hole, Wyoming each year by the Federal Reserve Bank of Kansas City.  Those few not fixated on Hurricane Irene yesterday might have seen some reports regarding IMF Managing Director Lagarde’s remarks as well. But a laser-like focus on two speakers at one conference misses the importance of the Jackson Hole sessions.  Spread over two days, the conference...
2944 days ago
BCM International Regulatory Analytics wrote a new blog post titled Survival Economics
Here we go again.  Emotion and fear grip traders as the Middle East markets close and Asia’s markets prepare for Monday’s open. Four years this week, the subprime crisis hit money market mutual funds and global financial markets.  Since those first turbulent days, we have seen major financial regulatory reform in the United States, the elevation of the Group of Twenty (G20) to head of state level, the elevation of the Financial Stability Forum into the Financial Stability Board (FSB), major expansion in expectations for what the International Monetary Fund can and should deliver, and...
2965 days ago
BCM International Regulatory Analytics wrote a new blog post titled The Risk Telescope — The Guns of August?
Today’s sell-off has been expected by market participants for a few months now.  The financial press for weeks has been peppered with columnists, pundits and market strategists warning that senior executives should not depart for August vacations without computers and without a plan for handling severe market volatility.  In the last few days alone, we have seen: sorry economic data released in the United States; a U.S. debt ceiling deal that neither cut spending nor defined how spending should be cut in the immediate future; IMF calls for fiscal consolidation across the core of the global...
2968 days ago