Frances Coppola has whipped up an absolutely fabulous commentary on the BIS paper on safe assets, which cuts straight to the point:
“the purpose of government debt is not to fund government spending. It is to provide safe assets.” Read more
Basel catches European bank capital legislation letting big cross-border lenders play a bit too fast and loose with zero risk-weighting of government bonds for its taste, the FT says.
Well, here’s the key para… Read more
The trauma and cost of a public rescue must surely teach the bank management concerned to behave in a more prudent manner, right?
Wrong, according to a recent Bank of International Settlements paper. Read more
In 2010, when the BIS first revealed that it held gold swap agreements worth SDR8.16bn (representing 346 tonnes of gold) the revelation knocked the gold market.
That’s because rather than making money (or yield) from lending out its gold — as the BIS usually did — it had become cost effective for the BIS to lend out currency against gold collateral instead. Read more
The BIS Annual report released this Sunday is jam-packed with data, charts, observations and analysis. Joseph has already stuck up some of the most compelling…
But one of the other key points to emerge is in its chapter on the “limits of monetary policy”. There is, it appears, a marked admission that central banks may be losing control. Read more
Just when someone’s gone and put a decent dataset together, someone has to go and mess it up. Thanks, Spain and Australia. Really, thank you. None of us really cared that much anyway about the data being comparable from one period to the next. Whatevs.
– FT Alphaville’s Internal Monologue Read more
Many banks in the eurozone have a significant international presence. The diversification is a positive if the home market is suffering disproportionately. That being the case, perhaps one could expect further investment in less sickly markets abroad?
Maybe. Read more
Hopefully that headline gets your attention for the Basel Committee on Banking Supervision’s latest review of capital rules for banks’ trading books.
There is a lot in it — the Committee has been tinkering with trading books since the crisis exposed serious mismatches between the capital that banks’ models said they needed for trading structured credit, and the losses they ended up experiencing. In fact this review follows up on the 2009 rule-set dubbed ‘Basel 2.5′. Read more
Time for more BIS-timates of international banking activity — this time looking at developments in the deleveraging turn among eurozone lenders in late 2011.
These stats from the Bank for International Settlements go up to the end of December. Predictably they show a massive pullback in credit throughout the banking system with Europe and the eurozone leading the way. Read more
A year ago, Nicholas Vause of the Bank of International Settlements wrote about “Counterparty risk and contract volumes in the credit default swap market” and pointed out the relative increase in shorter maturity contracts.
Using a couple more surveys than he had then, we get (click to expand): Read more
It’s a well understood fact that credit derivatives markets are primarily dealer-to-dealer. We do, however, hear that there are clients, or “end-users”, hiding somewhere. The Bank of International Settlements’ Quarterly Review, out on Monday, invites us to take a closer look.
Introducing Nicholas Vause, who put the section of the Review together, and his informative graphs (click to enlarge): Read more
Depending on which way you want to look at it, over-the-counter derivatives either increased or decreased in size, as of mid-2011.
That’s according to Bank for International Settlements statistics that were released back in mid-November. Further discussion of the results came out on Monday as part of the BIS’s bigger quarterly review though. Read more
Can we really know anything about US banks exposure to Europe?
A familiar epistemological question, which is being asked again in the wake of MF Global’s demise and Jefferies’ circuit-breaking slide. Read more
From the ivory tower of academia has come a novel idea: why not just net away all those troublesome debt exposures?
For example, say Spain held Irish debt to the tune of €12bn and Ireland held €20bn of Spanish debt, then the two exposures could be netted out such that Spain owes Ireland €8 billion. The end result would be a reduced debt burden for both. Read more
The importance of inflation expectations to central bank policy is well-understood.
Equally well-known is that there are different, sometimes conflicting measures of these expectations. Surveys of households will show different expectations than surveys of professional economists, and markets-derived inflation expectations (from inflation-indexed debt and the like) will show different results than these survey-based measures. Such subtleties as how a question is framed can change the result. Read more
Central banks have pulled 635 tonnes of gold from the Bank for International Settlements in the past year, the largest withdrawal in more than a decade, the FT writes. The move, disclosed in the BIS’s annual report, marks a sharp reversal from the previous year when central banks added to deposits of gold at the so-called “bank for central banks” rather than lending it directly to the private sector amid growing concerns over counterparty risk. Central banks and other official institutions collectively hold about 30,000 tonnes of bullion in their reserves, and many seek to earn an income on their gold by lending it out, just as any other currency. However, demand to borrow gold has fallen sharply in the past decade, driving interest rates on gold lending to record lows. Hedging by gold miners, which is typically structured to involve borrowing gold, was traditionally the largest source of demand. But since miners have cut back their hedging programmes to almost zero, the gold lending market, which is mediated by large bullion-dealing banks, has dwindled. Read more
Global economic growth must slow to curb inflationary pressure around the world, the influential central bankers’ bank has warned, saying that there was little or no slack left for rapid non-inflationary expansion, reports the FT. In its annual report, the Bank for International Settlements said that with the scope for rapid growth closing, monetary policy should be quickly brought back to normal and countries should act urgently to close budget deficits. FT Alphaville has taken a look at the report, wherein BIS show how central bank balance sheets are exposed to greater risks than during the financial crisis. In further, topical news, Chinese premier Wen Jiabao is doubtful that his country’s four per cent inflation target can be met this year, according to Reuters. Read more
Those low interest rate u-Zirpers at the BIS are back.
The Bank for International Settlements, often known as the central banker’s bank, seems to share little in common with its low interest rate-advocating cousins in places like the UK and the US. In fact, the latest annual report from the BIS is fairly scathing when it comes to prolonged easy monetary policy. Read more
The Bank for International Settlements has warned that global growth must slow to address global imbalances, saying there is little to no slack left for rapid non-inflationary expansion, the FT reports. BIS in its annual report said that monetary policy should be quickly brought back to normal and countries should act urgently to close budget deficits. The tough recommendations from BIS – the international organisation which came closest to predicting the 2008-09 financial and economic crisis – came despite signs of weakening economic momentum this year. The BIS report, however, warned policymakers not to expect a normal recovery because much of the pre-crisis growth had been unsustainable and capacity will have been destroyed for ever, particularly in finance and construction.The BIS view is closest to that of the ECB but runs counter to that of the Fed, its largest member central bank, which made it clear last week that its interest rates would remain extremely low for an “extended period”. Read more
Because people still keep talking about this…
There appears to have been a massive amount of misunderstanding about recently published BIS statistics regarding US banks’ Greek exposures. The idea that US banks are on the hook for $32.7bn of CDS written on Greece was first expounded by the Street Light blog, then picked up by us (unfortunately), then spread to Fortune and onwards to markets. This week US bank stocks moved on the concern, apparently. Read more
Peripheral Europe — not just a European problem.
Statistics revealed by the Bank for International Settlements earlier this week showed European banks holding 64 per cent of reported foreign claims for troubled eurozone countries like Portugal, Ireland and Greece. But in terms of indirect exposure — things like CDS — US banks take pole position. Read more
Something new from the Bank for International Settlements to mull over this Monday morning.
The BIS has released its Quarterly Review — and with it those infamous foreign claims numbers. Read more
So it begins.
The first research we’ve seen quantifying European bank exposure is out to Japan following last Friday’s terrible earthquake and subsequent nuclear problems is out. Read more
Now there’s a title, from a new BIS working paper, to catch one’s eye.
In it, the authors tackle the issue of information asymmetry in the securitisation process — or the basic idea that the holders or creators of a security might have better information about the investment than potential buyers. Read more
Lorenzo Bini Smaghi, European Central Bank executive board member, has made a beautifully coherent argument for the need for a global independent central bank.
In a speech made on March 4 (via the Bank of International Settlements), he points out: Read more
In case you were unsure — macro-prudential is the new policy buzzword.
From a just-published working paper on the topic, by the BIS: Read more
Or, winners and losers in Europe’s debt crisis.
Goldman Sachs’ global markets guys — Thomas Stolper and Constantin Burgi — have the details: Read more
Growth in cross-border lending by banks came to an abrupt halt in the second quarter of 2010, reports the FT, driven particularly by a contraction of roughly $100bn in lending to banks in the eurozone, according to the latest quarterly report from the Bank for International Settlements. The latest report, released on Monday, highlights the vulnerability of countries dependent on cross-border flows for lending and underscores the rapidity with which lending to weaker eurozone nations dried up as anxiety about their finances gained force in the three months to June 2010. The BIS said that cross-border lending, which grew in the first quarter of 2010 for the first time since the collapse of Lehman Brothers in September 2008, continued to tilt markedly towards banks and non-financial companies in the faster-growing emerging economies in the Asia Pacific and Latin America-Caribbean regions and away from mature economies in Europe. Read more