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Tag >> European Union
European regulators in countries throughout Europe are in the midst of proposing a wave of new regulations to resolve the current crisis and reduce the threat of future ones. So is the European Commission. But not all of the regulators’ proposals are complementary, which could lead to a wealth of difficulties should conflicting proposals go forward in different jurisdictions, especially if they contradict EC proposals.
As the WSJ reported on Friday, the EC has set out numerous draft proposals in further efforts to improve banking market strength—proposing a maximum limit on board memberships for individuals; forbidding individuals from being both CEO and chairman of a given company; setting risk management responsibility at board level; restricting pay packages for top executives; and consolidating oversight of rating agencies under a new EU agency that can levy fees, set penalties and demand information. The proposed new rating agency overseer is a change from proposals made by the EC last fall, which left oversight to each country.
The market's reaction yesterday to German Prime Minister Angela Merkel's decision to bow to public opinion and curb what she called "destructive" trading brings the issue of financial transaction taxes and the like front and center.
But the fact that investors hate the idea of taxes and similar limits on transactions may belie the main argument against such measures, which is that the cost will simply be passed along to the public. If that were true, then traders' profits shouldn't suffer, and neither will markets' ability to help finance the real economy.
Large French and German banks appear to be the largest creditors to Greece and therefore stand to benefit the most from the 110 billion euros rescue package to Greece, at least indirectly since Greece won't default on its debt.
French financial institutions have the largest exposure in the world to Greek debt, holding about 50 billion euros of Greek debt, both from the private and public sectors.
Although dollar Libor rates have not hit the peak seen during the crisis in 2008, the three-month rate is now at the highest level since last August – at 0.421 percent on Monday - and the Libor Overnight Indexed Swap (OIS) spread, which gauges banks’ willingness to lend to other banks, is also at its widest since last August – at 19.2 basis points on Monday.
The rise shows that banks and institutional investors are becoming more risk-averse as fears rise over growing European deficits. Investors are wary of buying banks’ commercial paper, and both banks and institutional investors are looking for safe haven longer-term investments to wait on the outcome of ECB and EU stabilization measures.
The European Union has finally stepped up to the plate with a bailout package for member states - after months and months of hemming and hawing - and it only took the potential bottoming out of the euro and fears of another global panic to light a fire. Never mind troubles in Greece since last November, never mind Ireland, or the UK, or Portugal or Spain.
The bailout package agreed by EU finance ministers early this morning will supply countries in the region with up to $560 billion in newly-minted loans and $76 billion available through a current lending program. The IMF will also front up to $321 billion – making a total of $957 billion in loans available to help shore up ailing European economies.
I really don't understand what the Times means when it says the European Central Bank lacks certain powers that the Federal Reserve has.
Yes, the ECB lacks the Fed's dual mandate: The ECB's mission is price stability alone, not that plus full employment. Nor does it have access to a government treasury. But what practical effect does any of this have? None that I can see.
Posted by Ron F in Timothy Geithner, Geithner, financial crisis, European Union, europe, Euro area, economy, demand, default, career/management, bonds, Banks, banking reform, bailouts
The violent backlash against the rescue plan that Europe has come up with for Greece should be a warning sign for those who think the bond market should rule public policy.
Yes, Greece must get its act together in terms of the black market and corruption, and tighten its belt on public finances. It simply has no other choice. But austerity isn't going to help the country repay its debt, not when the global economy continues to suffer from weak demand.
As we reported recently, one of the biggest concerns of IASB/FASB accounting standard convergence is the alacrity with which the IASB gave in to political pressure to ease banks’ fair value reporting standards during the financial crisis. However the IASB is now presented with the chance to quell fears and dispel the belief that it is under the thumb of the European Union – whether they will remains to be seen.
This issue comes once again to the fore as new EU internal market commissioner Michel Barnier, at a recent meeting of top accounting firms and regulators in London, inferred that future funding for the IASB could depend on its' agreeing to more involvement by EU leaders. The Financial Times reported on Sunday that Barnier said policymakers in Brussels planned to review current IASB funding – of $6.5 million – annually and that it was “premature” to think that they would increase that budget. This came after statements suggesting that the EU should be more involved in IASB governance, which left the audience stunned, according to the FT.