May 26, 2011
JLN Interest Rates - http://www.jlninterestrates.com
Conversation Starter
Five Minutes with Ira Krulik, NYPC
Launched on March 21, 2011 with 10 clearing member firms, New York Portfolio Clearing (NYPC) - a joint venture of The Depository Trust & Clearing Corporation (DTCC) and NYSE Euronext- clears U.S. interest rate futures and cross-margins such positions against fixed income cash instruments through DTCC’s subsidiary, the Fixed Income Clearing Corporation (FICC). Ira Krulik, chief operating officer of NYPC spoke this week with JLN Managing Editor Christine Nielsen. He shared what he believes are the advantages of NYPC's risk management, “one-pot” cross-margining and clearance operations and its settlement efficiencies, in addition to his thoughts on where the NYPC may be headed from here.
Takeaways:
-Already, there are 11 approved clearing members, and several more in the pipeline.
-NYPC hopes to add options on futures by the end of this year.
-Locked-in delivery makes the process seamless.
1) How did you come to be at the NYPC?
Ira Krulik: After over 30 years in the futures industry, I was approached at the 2010 annual Futures Industry Association (FIA) conference about my interest in the new venture. Once I understood who the parent organizations were and what they were planning to do, the concept became more intriguing. They were giving clients additional choice in the marketplace with a real value add attached. Upon returning from the conference, I had the opportunity to meet with Walt Lukken, who had recently been named CEO of NYPC; but I spoke with my most important counsel, Mrs. Krulik, about the opportunity and she said, ‘Go for it!’
2) What do you feel is the biggest challenge for NYPC as a new derivatives clearing organization? What do you feel is the organization's biggest strength?
Krulik: The challenge is for the external world to find out who we are and what we do. Because the value proposition is in the “one-pot” margin process, we've been reaching out to firms that we believe are the biggest traders in the fixed income space and signing them up.
There are 11 approved clearing members with several more in the pipeline. It is our hope to be at 20 firms plus by the end of the summer.
In terms of strengths, clearly it's the efficiencies we are bringing to the marketplace. Being able to bring the cash positions and futures into one pot, and calculating a single margin call / exposure, is a win for the regulators and a win for the firms because it allows the clearinghouses and regulators to view common members’ positions cleared at NYPC and FICC in total, and therefore, it is a truer representation of the risk and thus the capital (margin) needed to maintain that risk. NYPC’s one-pot model also allows firms to settle with NYPC and FICC in a single call with a single cash movement, reducing the number of banking transactions to accomplish the same operational requirement.
**CN: See the full MarketsWiki "Five Minutes" interview with Krulik here.
Lead Stories
Treasury’s Regulatory Review: Reducing Costs and Minimizing Burdens
By George W. Madison, U.S. Department Of The Treasury
In January, President Obama outlined his plan to create a 21st-century regulatory system that is simpler and smarter and that balances the obligation to protect public health and safety with the commitment to promote economic growth and job creation. As a key part of that plan, the President directed every agency to review the rules already on their books in order to remove those that are out-of-date, unnecessary, overly burdensome, or in conflict with other rules.
http://jlne.ws/lhJqTo
Fed Gave Banks Crisis Gains on Secretive Loans
By Bob Ivry, Bloomberg
Credit Suisse Group AG (CS), Goldman Sachs Group Inc. (GS) and Royal Bank of Scotland Group Plc (RBS) each borrowed at least $30 billion in 2008 from a Federal Reserve emergency lending program whose details weren’t revealed to shareholders, members of Congress or the public.
http://jlne.ws/m4u7rZ
US default ‘more likely than in Indonesia’
By James Mackintosh, FT.com
It sounds dotty to suggest the US is at imminent risk of default. A country that has rarely been able to borrow so cheaply, that issues debt in its own currency and has just demonstrated that it can print as much money as it likes need never miss a coupon payment. Yet in the past fortnight traders have come to the conclusion that America might breach its own constitutional clause that its debt “shall not be questioned”. According to Markit, the cost of one-year US credit default swaps, which insure against default, almost tripled in six trading days.
http://jlne.ws/iJIXlV
Major world banks handled Libya cash, report
Michael Peel and Sam Jones, The Globe And Mail
Libya lost billions of dollars on sophisticated financial products sold to Moammar Gadhafi’s sovereign wealth fund by some of the world’s leading financial institutions, according to a confidential Libyan government document.
http://jlne.ws/ljVNi7
ISDA Publishes OTC Derivatives Market Analysis
Press Release
The International Swaps and Derivatives Association, Inc. (ISDA) published today a new analysis of the over-the-counter (OTC) derivatives market based on year-end statistics published by the Bank for International Settlements (BIS) and LCH.Clearnet’s SwapClear. According to the analysis, the level of cleared interest rate swaps exceeded 50 percent of interest rate swap notional outstanding at the end of 2010, up from 21 percent at year-end 2007. Over the same time frame, the volume of uncleared interest rate swaps outstanding declined from $201 trillion to $116 trillion, a decrease of $85 trillion or 42 percent.
http://jlne.ws/hHMAsV
Lagarde Announces IMF Candidacy
BY DAVID GAUTHIER-VILLARS, WILLIAM HOROBIN AND DAVID PEARSON, WSJ.com
France's Finance Minister Christine Lagarde on Wednesday officially declared her candidacy to replace Dominique Strauss-Kahn as managing director of the International Monetary Fund, launching a global race for the prominent position.
http://jlne.ws/mezZN9
Lagarde is Front-Runner to Head IMF
By Gonzalo Vina and Andres R. Martinez, Bloomberg
Support mounted for French Finance Minister Christine Lagarde to head the International Monetary Fund as Mexico offered its central bank governor as an emerging- market candidate, challenging Europe’s 65-year hold on the job.
http://jlne.ws/keFwki
With The Backing Of Europe, French Fin Min Lagarde Announces IMF Bid
Forbes
French Finance Minister Christine Lagarde officially announced her candidacy for the top seat at the IMF. After much speculation, Lagarde has garnered the support of major European figures such as Germany’s Angela Merkel and appears poised to replace her former compatriot, Dominique Strauss-Kahn.
http://jlne.ws/jvokbo
Lagarde Warns on Greece's Public Finances
BY GEOFFREY T. SMITH, BRIAN BLACKSTONE AND GABRIELE PARUSSINI, WSJ.com
French Finance Minister Christine Lagarde signaled Paris might support a rescheduling of Greek debt, warning that Greece is at risk of default if it doesn't do more to bring its public finances into order. The comments mark a shift in France's position in a debate that has pitted Germany and other euro-zone governments against the European Central Bank, which opposes any form of restructuring of Greek debt.
http://jlne.ws/kauSrV
Europeans Focus on Retaining Leadership of IMF
By LIZ ALDERMAN, NY Times
As the International Monetary Fund prepared to accept nominations Monday to replace Dominique Strauss-Kahn at its helm, European officials rallied over the weekend around Christine Lagarde, France’s finance minister, as their top choice for the post, despite fresh warnings from leaders of emerging markets and other countries that simply handing the job to another European could undermine the fund’s legitimacy.
http://jlne.ws/laVbdh
France: China Backs Lagarde as IMF Head
By INTI LANDAURO And OWEN FLETCHER, WSJ
PARIS—China backs French Finance Minister Christine Lagarde as a candidate to head the International Monetary Fund, the French government's spokesman, Francois Baroin, said Tuesday.
http://jlne.ws/kr0mhY
IMF Executive Board Initiates Selection Process For Next IMF Managing Director
Press Release
http://jlne.ws/ltFkaa
U.S. Treasury Department Statement Regarding Leadership Of The International Monetary Fund
Press Release
http://jlne.ws/iqZtrv
IMF Announces New Ethics Code And Standards
By Ian Talley, MarketWatch
The International Monetary Fund said Thursday it recently changed its ethics code, now censuring staff for personal relationships between supervisors and subordinates. The new ethics code was approved on May 6.
http://jlne.ws/koELuL
**CN: Time to reevaluate.
Morgan Stanley Plans to Let Retail Brokers Use LinkedIn, Twitter
By Michael J. Moore, Bloomberg
Morgan Stanley (MS) Smith Barney, the world’s largest brokerage, will let financial advisers market themselves and share ideas with clients through social- networking websites LinkedIn and Twitter.
http://jlne.ws/kkuHYV
Treasury set to make small profit in sale of AIG stock
By Justin Baer and Telis Demos in New York and Tom Braithwaite in Washington, Financial Times
American International Group and its largest investor, the US Treasury, are poised to raise at least $8.7bn through a sale of stock on Tuesday, handing the federal government a small profit on the deal, people familiar with the matter said.
http://jlne.ws/j99zwa
Vickers to insist on bond-funded debt buffer
By Patrick Jenkins and Sharlene Goff, Financial Times
Britain’s banks could be forced to hold capital equivalent to half as much again of their minimum equity requirements, under plans being considered by the Independent Commission on Banking.
http://jlne.ws/jOJFqo
Community Banks Lobby to Limit New Regulations
By BEN PROTESS, NY Times
Network television ads appearing in the Washington area feature an anxious woman who cautions that “community banks and credit unions will be squeezed” by “bad” regulation.
http://jlne.ws/mmZ7Ap
Ex-Fed Official to Join Barclays as Senior Policy Advisor
Wall Street Journal Blogs
Brian Madigan, who ran the Federal Reserves powerful monetary affairs group, is joining Barclays Capital as a senior policy adviser, according to an internal memo announcing the hire.
http://jlne.ws/issULs
European Firms Shun Euro Bonds
BY ELENA MOYA, WSJ.com
European companies have shunned the euro in the bond markets this year and have instead piled into dollar, sterling and even ruble-denominated bonds, data from Dealogic show. For the first time since 2000, bonds denominated in euros account for less than half of all European corporate bond issuance.
http://jlne.ws/kXvbSg
JPMorgan’s Dimon Was Tempted To Remind Geithner Where Treasury’s Bread Is Buttered
Forbes
The Associated Press had an interesting tidbit last week in a story on JPMorgan Chase CEO Jamie Dimon’s May 19 appearance at a dinner for the University of Colorado’s Denver Business School, aside from the headlines generated when the banker said a U.S. debt default would be a “moral disaster.” While the AP led with that morsel, later in the story came an interesting anecdote from the period when Dimon’s bank paid back taxpayer dollars it received under the TARP program, and a reminder that some banks believed they could skate through the 2008 crisis just fine on their own.
http://jlne.ws/iRdJTO
U.S. Commercial Property Prices Drop to Post-Recession Low
By Brian Louis and David M. Levitt, Bloomberg
U.S. commercial property prices fell to a new post-recession low in March as sales of financially distressed assets weighed on the market, according to Moody’s Investors Service.
http://jlne.ws/jeEtd4
ISDA Publishes "The Economics of Central Clearing: Theory and Practice," A Discussion Paper on Clearing Issues
Barron's
The International Swaps and Derivatives Association, Inc. (ISDA) today announced the publication of an in-depth discussion and analysis of the purposes, function and issues associated with central clearing of over-the-counter (OTC) derivatives.
http://jlne.ws/lrz9Pi
NY senators bat with banks on rule change
New York Post
New York lawmakers are coming to the rescue of some major US banks. The Senate agricultural committee is set to host hearings as early as mid-June to discuss new derivatives rules, which have become a hot-button issue on Wall Street, The Post has learned. US legislators, including Sens. Chuck Schumer...
http://jlne.ws/iPS2FC
Emerging market bond fund flows signal shift
By Robin Wigglesworth in London, Financial Times
Money is continuing to pour into emerging market bond funds, subduing the cost of borrowing for developing countries and underlining the shift in economic power away from the western heavyweights of the financial system. Eight consecutive weeks of net inflows have taken the total invested in these funds this year to $7.9bn, according to EPFR, the fund data provider.
http://jlne.ws/iYRWzY
Financial regulation: A shield asunder
By Tom Braithwaite, Brooke Masters and Jeremy Grant, FT.com
On a late January day in a discreet basement room of the Grischa Hotel by the ski lifts of Davos, Tim Geithner listened to grievances from 14 executives from some of the biggest financial groups in the world.
http://jlne.ws/mBTg5E
Legal trouble mounting for biggest mortgage lenders. How much will it cost to buy peace with govt?
By Abigail Field, CNNMoney
The trouble for America's largest mortgage lenders just keeps mounting. How much will it cost them to make it all go away? Bank of America, JPMorgan Chase (JPM), Wells Fargo (WFC), Citigroup (C) and Ally Financial violated the federal False Claims Act, according to officials briefed on federal investigations who spoke to the Huffington Post. The unnamed officials say the banks submitted faulty documents in seeking federal reimbursement from the Federal Housing Administration homes they'd foreclosed on.
http://bit.ly/lE8TNm
EU told to repair banks before Greek restructuring
By Dan McCrum, FT.com
The European Union should repair its banks before attempting to restructure Greek debt, Peter Fisher, head of fixed income for BlackRock, the largest asset manager, has warned. The European authorities “keep confronting this dilemma of the need to restructure debt for the debtors’ sake, and then the consequences for the European financial system if they do,” said Mr Fisher in a video interview for FT.com.
http://jlne.ws/mP1t34
Events
2011 Morningstar Investment Conference
June 8-10, 2011
Morningstar's Conference For Leaders From Across The Investment Industry - Chicago
http://jlne.ws/gD5nJ1
Introduction to Treasury Futures: Factoring the Risks
June 16, 2011
IFM's Course On Cash And Futures Treasury Trade - New York City
http://jlne.ws/kdOeSQ
Treasury Futures Basis: Beyond the Risks
June 16, 2011
IFM's Course On the Treasury Futures Basis - New York City
http://jlne.ws/kdOeSQ
Treasury Futures: Using International Fixed-Income and Money Market Spreads
June 16, 2011
IFM's Course On Using International Fixed-Income and Money Market Spreads - New York City
http://jlne.ws/kdOeSQ
Making Sense of Credit Default Swaps
June 22, 2011
IFM's Course On Credit Default Swaps - Chicago
http://jlne.ws/kdOeSQ
FIA Treasury & Rates Forum
September 14, 2011
FIA Program On Growing Role Of Treasury Futures - New York City
http://jlne.ws/fQFQXP
Economic News
Economy Grew at 1.8% Rate in First Quarter
Associated Press/ The New York Times
High gasoline prices, government budget cuts and weaker-than-expected consumer spending caused the economy to grow only weakly in the first three months of the year.
http://jlne.ws/l2MjSL
While the top line GDP number was essentially unchanged, there were some interesting revisions to the major components
Federal Reserve Bank of Cleveland
Real GDP was unchanged during the second estimate, rising at an annualized rate of 1.8 percent (coming in at the low end of expectations), compared to a 3.1 percent gain in the fourth quarter. While the top line number was essentially unchanged, there were some interesting revisions to the major components. Importantly, real personal consumption growth was (somewhat unexpectedly) revised down from 2.7 percent to 2.2 percent, subtracting 0.4 percentage point from growth. All three major components of consumption (durables, nondurables, and services) were knocked down during the revision. Upward revisions to nonresidential investment and private inventories offset the downward adjustment to consumption.
http://jlne.ws/jwi0cn
U.S. Home Prices Fell 5.5%, Most in Almost Two Years
By Kathleen M. Howley, Bloomberg
U.S. home prices dropped 5.5 percent in the first quarter from a year earlier, the biggest decline in almost two years, as sales of discounted foreclosures undermined real estate values.
http://jlne.ws/kWxvMR
Revenue Slide Dents Banks' Recovery
BY VICTORIA MCGRANE AND MICHAEL R. CRITTENDEN, WSJ.com
U.S. bank profits soared in the first three months of 2011, but revenue coming in the door fell for only the second time in almost 30 years, casting a shadow on the industry's continued recovery from the 2008 financial crisis.
http://jlne.ws/jvLmv5
Chicago Fed Index: Index shows economic activity weakened in April
Led by declines in production-related indicators, the Chicago Fed National Activity Index fell to –0.45 in April from +0.32 in March. April marked the lowest reading of the index since August 2010. Three of the four broad categories of indicators that make up the index deteriorated from March, but two of those three categories made positive contributions to the index in April.
http://jlne.ws/jkM4vL
Exchanges, Clearing Houses & MTFs
DTCC: Indemnification Provision In Dodd-Frank Could Create Unintended Negative Consequences
Press Release/Reuters
The Depository Trust and Clearing Corporation (DTCC) today cautioned in testimony before a House Agriculture subcommittee that the indemnification provision of Dodd-Frank could create unintended negative consequences, including undermining efforts to enhance transparency and mitigate systemic risk in the over-the-counter (OTC) derivatives market. The hearing was called to discuss global harmonization, extra-territoriality issues and technical concerns with the implementation of the Dodd-Frank Act.
http://jlne.ws/kB2eT7
LCH.Clearnet has revised risk parameters for Irish gov bonds. Additional margin will change from 55% to 65% for longs
In accordance with the Sovereign Credit Risk Framework and in response to the yield differential of 10 year Irish government debt against a AAA benchmark, LCH.Clearnet Ltd has revised the risk parameters for Irish government bonds cleared through the RepoClear service. The additional margin required for positions of Irish government bonds will consequently be increased from 55% to 65% for long positions; this amount will be adjusted for the current bond price*. Short positions will pay a proportionately lower margin.
http://jlne.ws/msJphG
CME To Rework Financial Safeguards For CDS Clearing Platform
By Katy Burne, Of DOW JONES NEWSWIRES/Nasdaq
CME Group Inc. (CME) is planning to rework financial safeguards for its derivatives clearing platform for credit default swaps over the next quarter or two, establishing a separate default fund for CDS clearing, the company said Tuesday.
http://jlne.ws/lMC7aJ
June 17, 2011: NYSE Liffe U.S. Becomes the Sole U.S. Exchange for MSCI Index-based Futures
Launched in September of 2008, NYSE Liffe U.S. is the U.S.-based and CFTC-registered futures exchange of NYSE Euronext. NYSE Liffe U.S. offers trading in precious metals futures and options, MSCI index-based equity futures and U.S. interest rate futures including Eurodollar and U.S. Treasury futures.
http://jlne.ws/kWIMCh
CME eyes move into swaps in Europe expansion drive
Luke Jeffs, Reuters
U.S. exchange giant CME Group is eying a move into Europe's lucrative swap clearing business by early 2012 as part of its rapid expansion plans in the region, where it has only just gained a foothold.
http://jlne.ws/mz5ieq
Firms & Banks
UBS Plans to Distance Key Investment Banking Unit
BY DAVID ENRICH AND GINA CHON, WSJ.com
Swiss financial giant UBS AG is planning to separate its investment bank and incorporate it outside of Switzerland in an effort to placate regulators there who want to prevent another bailout should the bank fall on hard times as it did in 2008, said people familiar with the matter.
http://jlne.ws/lTGJpj
Goldman Bankers React to Subpoena News
CNBC
At an fashionable hotel bar on a recent night in New York, a trio of Goldman Sachs investment bankers were discussing the news that federal prosecutors are expected to issuing subpoenas for documents related to Goldmans mortgage business.
http://jlne.ws/kJvpnD
More banks targeted in New York probe
By Kara Scannell and Justin Baer in New York, Financial Times
The New York state attorney-general’s probe into mortgage practices at large banks has expanded to include Royal Bank of Scotland, UBS, JPMorgan Chase and Deutsche Bank, bringing the number of banks under scrutiny to seven, people familiar with the matter say.
http://jlne.ws/jBtJYn
JPMorgan, UBS, Deutsche Bank Said to Face N.Y. Mortgage Probe
BusinessWeek
JPMorgan Chase and Co., UBS AG and Deutsche Bank AG are being investigated as part of New York Attorney General Eric Schneiderman's expanded probe of mortgage securitization, according to a person familiar with the matter.
http://jlne.ws/khiVux
How an Inquiry of Goldman Sachs Might Play Out
By PETER J. HENNING, NY Times
Goldman Sachs has already received subpoenas from unnamed regulators investigating its mortgage securities operations. Now, federal prosecutors appear to be interested in those operations as well, and subpoenas could follow. If so, this would signal a new — and potentially more threatening — inquiry into its conduct during the financial crisis.
http://jlne.ws/iqHUHx
Goldman Banker Hired by VTB Capital to Lead Overseas Unit
BusinessWeek
VTB Capital Plc, the investment- banking arm of Russia's second-largest lender, hired Atanas Bostandjiev from Goldman Sachs Group Inc. as its U.K. and international head.
http://jlne.ws/m59mlM
Citi hires ex-CEO of PricewaterhouseCoopers
Reuters via Yahoo! Canada News
Citigroup Inc has hired Samuel Di Piazza, Jr, the former chief executive of PricewaterhouseCoopers , to help its faltering investment bank rebuild after the financial crisis.
http://jlne.ws/m65R1X
Bank of America to Settle Overdrafts Suit for $410 Million
By ANDREW MARTIN, NY Times
Bank of America would pay $410 million to settle its piece of a broad lawsuit involving excessive overdraft fees on debit cards in a deal tentatively approved by a federal judge in Miami on Monday.
http://jlne.ws/lHeK6S
In Reputation Ranking, Some Banks Break from the Pack
By Heather Landy, American Banker
Public perceptions of bank brands remain a long way from rosy, but they are becoming more nuanced. The 30 banks included in American Banker's second annual survey of bank reputation, conducted by the Reputation Institute, scored higher with consumers on average, and with a much wider distribution, than last year. The results suggest that reputation, in recent years an albatross for the financial sector as a whole, is starting to look more like a point of differentiation, with several large institutions able to break away from the pack more convincingly as they moved to the top of the ranking.
http://jlne.ws/jLtNP5
Goldman execs expect subpoenas, WSJ says
Market Watch
Goldman Sachs Group Inc. executives expect to receive subpoenas soon from U.S. prosecutors seeking more information about the firm's mortgage-related business, the Wall Street Journal reported Friday, citing unidentified people familiar with the situation. Officials at the investment bank reckon the Department of Justice will ask for certain documents and other ...
http://jlne.ws/moF2ac
UBS Chief Sends Memo to I-Bankers
CNBC
UBS Chief Executive Officer Oswald Gruebel admitted in an email this morning that some of the high level departures from the Swiss banks investment banking have been regrettable.
http://jlne.ws/lRzXsF
JPMorgan Traders Are Taking Market Share, O'Connor Says
BusinessWeek
JPMorgan Chase & Co., the most profitable U.S. bank, is taking trading revenue from Goldman Sachs Group Inc. and Bank of America Corp. as investments including its $1.7 billion purchase of RBS Sempra's commodities business begin paying off, Deutsche Bank AG analysts said.
http://jlne.ws/kt8ObV
ING Can Be More With Less, Says the Reluctant Banker
BY MAARTEN VAN TARTWIJK AND ARCHIE VAN RIEMSDIJK, WSJ
When Jan Hommen was approached to run ING Groep NV, the timing couldn't have been worse. The Dutchman was just planning to move to the U.S. and spend more time with his children and grandchildren. And, having little experience in banking and insurance, he was far from the obvious choice to guide the Dutch bancassurer through the biggest crisis in its history.
http://jlne.ws/lj2yMm
RBS sees opportunity in crisis
The Nation, Thailand's English news
Many banks across the world seem to have hit the alarm button. The sharp swings in global oil prices since the start of the wave of unrest in the Middle East and North Africa, the fragile US economic recovery, Europe's prolonged sovereign-debt crisis and Japan's tremendous disaster have created uncertainty for them. But not for the Royal Bank of Scotland.
http://jlne.ws/lJN8q8
UBS's McCann Denies Speculation of Talks With Wells Fargo
Bloomberg
UBS AG (UBSN) denied speculation it may sell its U.S. wealth management unit to Wells Fargo & Co. (WFC) , saying it remains an "important part" of the Swiss bank.
http://jlne.ws/l1DLhO
Morgan Stanley CEO Frets Over Capital Rules
Finance Technology Network
Morgan Stanley Chief Executive James Gorman is concerned that regulators may force large banks to hold too much capital, a move that banks worry would crimp profits.
http://jlne.ws/l6Iroo
Deutsche Bank chairman denies Kirch conspiracy
Reuters via Yahoo! India News
The legal battle between Deutsche Bank and media mogul Leo Kirch looked no closer to being resolved after a day of hearings in a Munich court which saw Chief Executive Josef Ackermann in the witness stand.
http://jlne.ws/k2W33v
Regulators
Thomas M Hoenig: Back to the business of banking
Speech by Mr Thomas M Hoenig, President of the Federal Reserve Bank of Kansas City, at the 29th Annual Monetary and Trade Conference, Global Interdependence Center and Drexel University LeBow College of Business, Philadelphia, Pennsylvania, 24 May 2011.
Introduction Today’s meeting and sessions are about financial reform, and I congratulate the organizers of this conference for keeping this important topic in the mainstream of discussion. Much remains to be done around reform if we are to ensure a more stable financial system. Topics today will focus on housing, the Dodd-Frank Act, governmentsponsored enterprises (GSEs), the safety net and other reform efforts that necessarily follow the recent financial crisis that has so devastated our national economy.
http://jlne.ws/iCVcSs
Paul Fisher: The economic outlook - some remarks on monetary policy
Speech by Mr Paul Fisher, Executive Director for Markets of the Bank of England, to the Agency for Scotland, London, 23 May 2011. (I would like to thank Ronnie Driver for his help in preparing this speech.)
For most of us, the current outlook for the UK economy is not a very attractive prospect. After experiencing a precipitous fall in demand during 2008/09, the latest estimates suggest that
UK output in 2011 Q1 remained around 4% below its peak pre-crisis level. The Monetary Policy Committee’s (MPC) central projection published in its May Inflation Report, is for
output to grow at around its historical trend rate, such that it would be mid-2012 before that previous peak level is regained.
http://jlne.ws/lpeoax
Fed’s Kocherlakota Lowers Forecast for Economic Growth, Urges Tightening
By Steve Matthews, Bloomberg
Federal Reserve Bank of Minneapolis President Narayana Kocherlakota trimmed his forecast for U.S. economic growth and raised his outlook for unemployment slightly while reiterating his call for higher interest rates this year.
http://jlne.ws/myz60r
OECD urges Fed and BoE to raise rates
By Chris Giles in Paris, Financial Times
The Federal Reserve and the Bank of England should follow the European Central Bank and implement “early” rises in interest rates, the Organisation for Economic Co-operation and Development said on Wednesday, as it urged central banks to respond to evidence of self-sustaining growth.
http://jlne.ws/iJ9nAC
OECD looks to measure the ‘better life’
By Chris Giles in Paris, Financial Times
It is time to move beyond gross domestic product when measuring the success of societies, the Organisation for Economic Co-operation and Development, has concluded in a change of mission for the international organisation. Known for most of its 50 years as an establishment of orthodox economics, promoting structural reforms to boost GDP growth, it launched a “better life initiative” on Tuesday to measure the quality of life in the Organisation’s 34 member countries.
http://jlne.ws/lUtL0K
City of London concerned by Mifid poll
By Jeremy Grant, Financial Times
The City of London has expressed concern after a poll of brokers and asset managers based in continental Europe showed some believed that rules allowing large blocks of trades to be done without prices displayed beforehand could undermine market transparency.
http://jlne.ws/kKPCWM
IMF Executive Board Concludes 2011 Article IV Consultation with United Arab Emirates
Public Information Notice (PIN) No. 11/57
May 23, 2011
On April 21, 2001, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the United Arab Emirates (U.A.E.), and considered and endorsed the staff appraisal without a meeting.
Background
The economic recovery in the U.A.E. is gaining strength, supported by a favorable global environment but subject to increased regional uncertainty. Real nonhydrocarbon GDP growth is projected to accelerate to 3.3 percent in 2011 from 2.1 percent in 2010, reflecting stronger tourism, logistics, and trade in the emirate of Dubai; and large public investment spending in the emirate of Abu Dhabi, including through Government-Related Entities (GREs)...
http://jlne.ws/lSSQwE
IMF Executive Board Approves An E26 Billion Extended Arrangement For Portugal
Press Release
The Executive Board of the International Monetary Fund (IMF) today approved a three-year SDR 23.742 billion (about E26 billion) arrangement under the Extended Fund Facility for Portugal in support of the authorities’ economic adjustment and growth program. This front-loaded program makes SDR 5.6 billion (about E6.1 billion) immediately available to Portugal from the IMF. In 2011, total IMF financing will amount to about E12.6 billion and will be partnered with about E25.2 billion committed by the European Union.
http://jlne.ws/jEvM6v
Remarks By Deputy US Treasury Secretary Neal S. Wolin At The Singapore Exchange
Press Release
http://jlne.ws/jJfASE
Basel Methodology, EU Stress, Resona Pledge, Privacy Hearings: Compliance
Bloomberg
Bank of Canada Governor Mark Carney said global regulators intend to release criteria for identifying systemically important financial institutions in July.
http://jlne.ws/inSXiF
Financial regulation: A shield asunder
By Tom Braithwaite, Brooke Masters and Jeremy Grant, Financial Times
On a late January day in a discreet basement room of the Grischa Hotel by the ski lifts of Davos, Tim Geithner listened to grievances from 14 executives from some of the biggest financial groups in the world.
http://jlne.ws/jlMCRV
IMF: Wider Plan Needed to Address Ireland's Problems
IMF Survey Online
The Irish government has been making good progress in addressing the country’s deep-seated economic problems since it took office March 9. But without comprehensive action from the European Union, Ireland and other euro area countries with programs will struggle to restore their access to the markets.
http://bit.ly/l6jBOL
OTC
Swaps Users Urge CFTC to Drop Quote System to Get Better Prices
Bloomberg/BusinessWeek
Swaps users including Dow Corning Corp., Eastman Kodak Corp. and U.S. Steel Corp. want regulators to require prices be made public prior to trading, overturning a proposed rule that would limit distribution of the data.
http://jlne.ws/mLnjj1
Swaps Group Warns of 'Too Big to Fail' in Clearinghouses
BY KATY BURNE, WSJ.com
Derivatives clearinghouses can and do fail, and policy makers should be concerned that they could be the next "too big to fail" beneficiaries of federal bailouts, according to a discussion paper released by the International Swaps and Derivatives Association.
http://jlne.ws/mehi4g
Rate swap volumes set to surge on new system
By Jeremy Grant, Financial Times
Volumes in the interest rate swaps market are set to surge as regulatory reforms push the bulk of contracts currently traded over-the-counter onto electronic platforms. Icap, the world’s largest interdealer broker, and Tabb Group, a consultancy, predicted the Dodd-Frank act in the US and similar reforms of OTC derivatives in Europe would transform the interest rate swaps market – largely voice-brokered – into one with a far broader range of investors.
http://jlne.ws/m42Pvb
Analysis: OTC swaps face legal void as CFTC misses deadline
By Christopher Doering, Reuters
Billions of dollars in derivatives will be headed into legal limbo if U.S. regulators don't create a short-term fix to the market chaos that could be unleashed by missing a July financial reform deadline. The Commodity Futures Trading Commission, in the midst of writing dozens of new rules, has said it will miss the July 16 deadline for implementing rules that give it oversight of the $600-trillion global over-the-counter derivatives market.
http://jlne.ws/j318tR
ICAP Exceeds $300 Billion In US Electronic CDS Trades
By Katy Burne, Dow Jones
ICAP PLC (IAP.LN IAPLY), the world's largest interdealer broker, announced Thursday it has surpassed $300 billion in electronically traded U.S. credit default swaps on its BrokerTec platform. That cumulative tally since the broker launched electronic CDS trading in October 2007 signals that dealers are increasingly comfortable trading on-screen without human interaction with a broker.
http://jlne.ws/l8lP6V
Global News
Ireland says won't yield on corporate tax
Reuters
Ireland will not raise its ultra-low corporate tax rate despite pressure from France and Germany, even if that means paying higher interest rates on EU bailout loans, Finance Minister Michael Noonan said on Thursday.
http://jlne.ws/k5jkvh
Euroclear Bank To Provide Access To Chilean Domestic Debt Securities
ISS Mag
Euroclear Bank announces today the launch in June of settlement, custody and related services for cross-border Chilean domestic debt transactions. Simultaneously, Depósito Central de Valores S.A. (DCV), the Chilean Central Securities Depository (CSD), will offer similar services involving foreign securities transactions for its clients through Euroclear Bank. A bilateral transaction-processing link between DCV and Euroclear Bank is nearing completion. At the same time, the Chilean peso will become one of 54 settlement currencies in Euroclear Bank.
http://jlne.ws/mjexHh
EU's Damanaki tells Greece euro membership at risk
Reuters
Greece must take tough measures to deal with its debt crisis or it will have to return to the drachma, the EU's Fisheries Commissioner Maria Damanaki said on Wednesday.
http://jlne.ws/iLewa1
German bank exposure to Greece 'manageable:'
By William L. Watts, MarketWatch
German banks' exposure to Greece is "manageable," but contagion risks are high, Fitch Ratings said in a report released Wednesday. "The worst consequence of any Greek sovereign default for German and other European banks would be in a sharp increase in general capital market and creditor risk aversion at a time when many banks are still in rehabilitation mode," said Michael Dawson-Kropf, senior director in Fitch's EMEA financial institutions group. The ratings company said it "does not currently envisage" any rating action on German banks as a result of their direct exposure to Greece., but warned of "high potential contagion risks" if there were any restructuring of Greek sovereign debt
http://jlne.ws/kkm3Lr
Europe backs restricted clearing house reforms
By Nikki Tait in Brussels, Financial Times
European parliamentarians have given their backing to stricter regulation of derivatives but have restricted new rules designed to ensure that deals are cleared centrally to those contracts traded on a bilateral “over-the-counter” (OTC) basis. The move is a blow to those who had wanted to extend the scope of the regulation, known as the European Markets Infrastructure Regulation (Emir), to fast-growing exchange-traded derivatives as a way of spurring competition in the market
http://jlne.ws/k2DjE5
Moody's places 14 UK banks on watch
Brisbane Times
Moody's Investors Service on Tuesday placed 14 British banks including Lloyds TSB and Royal Bank of Scotland on review for possible downgrades, citing reduced chances of future government support.
http://jlne.ws/mBOW15
Goldman Sachs Hires ECB's Huw Pill as Chief European Economist
BusinessWeek
Goldman Sachs Group Inc. hired Huw Pill of the European Central Bank to replace Erik Nielsen as its chief European economist.
http://jlne.ws/mtbjbV
Malaysia mandates banks for global sukuk
The Malaysian Insider
KUALA LUMPUR, May 25 - Malaysia has picked four banks including CIMB, Citigroup and HSBC to arrange its upcoming US dollar global Islamic bond sale, IFR reported. The fourth bank could be Maybank, Thomson Reuters' unit IFR reported, adding that the sukuk offering was expected to be completed in June or July. Proceeds from the sale would be used to ...
http://jlne.ws/ixj8yA
Fitch revises Belgium’s outlook to negative from stable
By Gerry Davies, ForexLive
* Political risk is higher in Belgium than in other euro area peers
* Belgium will likely be downgraded if it misses official deficit targets
http://jlne.ws/j6mzTj
China's economy may face inflation, sluggish growth
People's Daily Online
China's National Economic Accounting and Economic Growth Research Center under Peking University released the "China Economic Growth Report 2011" on May 21. The report said that judging from the current macroeconomic imbalance in China, China is faced with both inflationary pressure and the risk of sluggish growth. China needs to prevent stagflation by controlling the gross unbalance in the current stage.
http://jlne.ws/lDciHx
Italy Shocked, Shocked by S and P Move
By Francesco Guerrera, WSJ.com
Judging from the reaction from local media and financial executives, Standard & Poor’s decision late on Friday to revise Italy’s sovereign debt outlook from “stable” to “negative” went down like a plate of overcooked pasta.
http://jlne.ws/mJwZ8i
Mizuho president to step down
TAIGA URANAKA, Reuters
Mizuho Financial Group’s (MFG-N3.08-0.03-0.96%) president will step down and its corporate banking chief will take the helm, Japan’s second-largest bank said on Monday, as it grapples with persistent system troubles including a breakdown in ATMs after the devastating March earthquake.
http://jlne.ws/knfu2n
Banks battle for $1bn Puerto Rican road
By Helen Thomas in New York, Financial Times
Goldman Sachs and Morgan Stanley are squaring off in the bidding to finance and operate one of Puerto Rico’s busiest roads as a 10-month-long privatisation process approaches its conclusion.
http://jlne.ws/jtefvh
Greece Downgraded by Fitch, Norway Cuts Funding
Greece’s troubles escalated further on Friday, as Fitch downgraded the country’s sovereign debt rating and Norway was one of three nations that froze a payment of 235 million kroner ($42 million) in European Economic Area grants to Athens.
http://jlne.ws/ilijtC
Spain Vote Threatens to Uncover Debt
By JONATHAN HOUSE And SARA SCHAEFER MUñOZ, WSJ
Weekend elections that threaten to drive Spain's ruling Socialist party from power in several regions and cities also promise a potentially nasty surprise: the revelation of piles of undisclosed debt in local governments that could undercut the country's drive to avoid an international bailout.
http://jlne.ws/mdekuL
Debt Calculations Weigh on Restructuring Decisions
By STEPHEN FIDLER, WSJ
For the first time this week, a taboo was lifted. European officials can now use the "R" word— restructuring—in sentences that don't also have "not" in them. Restructuring Greece's government debt—changing the conditions attached to its bonds to lessen the burden—is now something that can be talked about in polite company. (With the proviso that it will be the nicest, gentlest, most-investor-friendly restructuring possible.)
http://jlne.ws/j0LDoK
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