The most interesting news of the week in the financial world that will affect several large British banks it’s the draw up of a “Living will” by the end of the year. This will help them to outline the procedures to be dismantled more easily in any future financial crisis.
The economist article is the most complex of the ones I read, I have to say that even looking up some words it´s not easy to understand technical references that are not familiar to usual readers. What I like the most about the article it’s that they actually propose a solution for future liquidity crisis and the death of huge banks. The ringed fences it´s a decent solution so “If banks were run as federations of self-contained units, it would be easier to swoop in and save some parts while allowing others to die” (Art.1). But this is an idea that most of the banks don´t like because of the legal problems and how having different subsidiaries can affect to the reputation of a mayor bank entity. This separatism could also affect the lending viability making it harder for trading operations.
The Times is a well structured article, I like it because of how easily they explain the problem and the resolution of the organisms, which will change the financial system. In one side it’s the FSA “The regulator has strongly backed the idea of living wills in contrast with the Bank of England (The other side), which has called for banks to be split up so that they are not too big to fail.” (Art.2)
It´s interesting how the Bank of England “has called for banks to be split up so that they are not too big to fail.”(Art.2) I didn´t think that they could ever say something like that, a country that PRESUME of being the most liberal system in the world when in fact the creator of economic liberalism shouldn’t disturb into the banks rules by restricting them. A better way in my point of view will be the FSA approach about how the Banks:
• Should be required to produce recovery and resolution plans
• Banks which are deemed to be so big that they have an impact on the entire financial system must be forced to hold more capital.
• The need for more capital to support riskier parts of their business, such as proprietary trading.
It also mentions the problem about the bonuses in the investment banks, about that, the FSA said “The priority use of high investment bank profits must be to enhance capital levels rather than to support excessive bonus payments"
The Bloomberg news it´s as usual, short and concise, they give you a brief idea of the proposal that the FSA asked for the largest banks in the UK and they use the FSA words to explain the new regulation “Banks will have to hold more capital against trading books and derivatives will be cleared through a central clearinghouse, the FSA proposed.” (Art.3)
Art.1 http://www.economist.com/businessfinance/displaystory.cfm?story_id=14558456
Art.2 http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6885273.ece
Art.3 http://www.bloomberg.com/apps/news?pid=20601102&sid=aSocSdoWp8p0
*FSA: The Financial Services Authority (FSA) is an independent non-governmental body an independent body that regulates the financial services industry in the UK.
The economist article is the most complex of the ones I read, I have to say that even looking up some words it´s not easy to understand technical references that are not familiar to usual readers. What I like the most about the article it’s that they actually propose a solution for future liquidity crisis and the death of huge banks. The ringed fences it´s a decent solution so “If banks were run as federations of self-contained units, it would be easier to swoop in and save some parts while allowing others to die” (Art.1). But this is an idea that most of the banks don´t like because of the legal problems and how having different subsidiaries can affect to the reputation of a mayor bank entity. This separatism could also affect the lending viability making it harder for trading operations.
The Times is a well structured article, I like it because of how easily they explain the problem and the resolution of the organisms, which will change the financial system. In one side it’s the FSA “The regulator has strongly backed the idea of living wills in contrast with the Bank of England (The other side), which has called for banks to be split up so that they are not too big to fail.” (Art.2)
It´s interesting how the Bank of England “has called for banks to be split up so that they are not too big to fail.”(Art.2) I didn´t think that they could ever say something like that, a country that PRESUME of being the most liberal system in the world when in fact the creator of economic liberalism shouldn’t disturb into the banks rules by restricting them. A better way in my point of view will be the FSA approach about how the Banks:
• Should be required to produce recovery and resolution plans
• Banks which are deemed to be so big that they have an impact on the entire financial system must be forced to hold more capital.
• The need for more capital to support riskier parts of their business, such as proprietary trading.
It also mentions the problem about the bonuses in the investment banks, about that, the FSA said “The priority use of high investment bank profits must be to enhance capital levels rather than to support excessive bonus payments"
The Bloomberg news it´s as usual, short and concise, they give you a brief idea of the proposal that the FSA asked for the largest banks in the UK and they use the FSA words to explain the new regulation “Banks will have to hold more capital against trading books and derivatives will be cleared through a central clearinghouse, the FSA proposed.” (Art.3)
Art.1 http://www.economist.com/businessfinance/displaystory.cfm?story_id=14558456
Art.2 http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6885273.ece
Art.3 http://www.bloomberg.com/apps/news?pid=20601102&sid=aSocSdoWp8p0
*FSA: The Financial Services Authority (FSA) is an independent non-governmental body an independent body that regulates the financial services industry in the UK.
This is a good report and an important topic. But what is your conclusion? What do you think should be done about banks? Further regulation for example? Do you think that these retrospective measures will be useful in a future crisis - isn't it true that each crisis is different and this could be seen to be "shutting the stable door after the horse has bolted". 6.5/10
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