The head of the IMF is today arguing the case to redefine and expand its role.
The Fund must better detect risks that individual economies pose to the rest of the world, as well as offering liquidity early during a financial crisis, Dominique Strauss-Kahn is saying. The institution should also better monitor large, interconnected financial firms to construct a “risk map”.
The Dutch central bank will focus on ‘conduct and culture‘ at banks, rather (presumably) than focusing solely on reserve ratios and other capital requirements. This came out on February 8 (apologies) but a full English translation is not yet available.
So, ample room for weekend speculation on how the central bank intends to achieve their aim. Improving the integrity – not just of individuals within the system, but of the system itself – is the holy grail. Capital ratios are poor proxies toward this end.
US GDP has also been revised up this month, to 5.9 from 5.7 per cent (annual). As Calculated Risk observes, however, most of the improvement came from inventory change. Stripping those out would have seen a decline in GDP from 2.2 to 1.9 per cent over the same time period.
UK GDP was also revised upwards today, though markets were unimpressed and sterling continued its fall.
Credit to household and non-financial corporations continues to shrink in Ireland.
Private-sector credit declined by €3.2bn in January. Last year, most of the declines were explained by debt revaluation. Not this year. The €3.2bn is transactions related – i.e. the difference between repayment and draw-downs.
Moody’s Investors Service said today that the breakdown in the talks between the governments of Iceland, the United Kingdom and Netherlands to resolve the Icesave dispute puts the Icelandic government’s Baa3 rating under downward pressure. This is because Moody’s believes the failure to reach a new agreement is likely to lead to an extended delay of the IMF programme, a weaker economic recovery and potentially, political instability. Overall, Moody’s believes that Iceland’s path out of the crisis now appears more difficult.
Currency markets are unmoved by today’s upward revision in Q4 GDP figures: sterling is still falling. Jonathan Loynes of Capital Economics said the growth was driven by a slowdown in the rate of inventory unwinding, hardly the basis for a strong recovery.
Thursday’s business investment figures haven’t helped. They were sharply down – 5.8 per cent – against an expectation of a rise of 0.1 per cent.
Eurozone inflation has ticked up slightly, from 0.9 per cent on an annual basis in December, to 1.0 per cent for January. But do not be fooled by apparent stability.
Inflation has slowed, or indeed dropped, for most Eurozone countries this month, offset by steep rises in Malta and Cyprus. Inflation has also risen in Ireland, Luxembourg and Belgium, although by less than their average monthly increase over the past four months.
China is carrying out stress tests on labor-intensive industries to gauge the effect a stronger yuan would have on earnings, reports Bloomberg (itself reporting local paper the 21st Century Business Herald). Consequent speculation on the yuan has pushed forward prices up.
The yuan’s value has been kept at about 6.83 per dollar since July 2008, following a 21 per cent advance over three years, as policymakers intervened to help exporters weather a global recession.
Talks have collapsed between Britain, the Netherlands and Iceland about repayment of £3.4bn (€3.8bn) lost by depositors in the failed online bank Icesave, raising fears that the country will fail to meet its obligations.
On Monday Iceland rejected an offer to soften repayment terms, British officials said. It dismissed a proposed reduction in interest rates as insufficient and failed to win support for a counter-offer that one negotiator described as “fanciful”.