Daily Archives: July 5, 2011

Claire Jones

The Bank of England wants more banks to become members of Chaps, its high-value payments system, saying that it will force them to sign up if they don’t volunteer.

Why so? Judging by the comments of Chris Salmon, the chief cashier, this morning, it appears that the Bank is concerned that if the number of correspondent banks remains at 18, then this could pose a threat to financial stability. 

Claire Jones

Macroprudential is the buzzword of the moment (as this post notes, policymakers are keen to slap the label on anything they can). But do macroprudential measures actually work?

Of course, that depends on defining what “work” means, which – given that there are no precise indicators of financial stability – is no easy task.

Around the cusp of the year, Brazil introduced its own macroprudential measures, which included higher capital and reserve requirements, and limits on vehicle financing. Their stated aim: “to allow the continuity of sustainable credit market developments” following rampant credit growth of 22% last year.

So have they fared? 

Claire Jones

The appointment of Alistair Clark to the interim Financial Policy Committee raised a few eyebrows among the Treasury Committee.

It was not because they thought he lacked experience. Rather, it was that Mr Clark, who worked at the Bank of England for 36 years and was seen as one of the governor’s closest advisers during the crisis, was named one of four “external” members.

The committee, already concerned that there are too few external voices on the FPC, indicated that it was none too keen on an “insider” such Clark being appointed as one of the externals once the interim body becomes statutory. 

Ralph Atkins

Interest rate hikes by the European Central Bank hardly get noticed these days. That is not just because Greece dominates the headlines. It is also because Jean-Claude Trichet, president, has become adept at guiding financial markets. Last week he reaffirmed that the ECB’s governing council was exercising “strong vigilance” – code for an interest rate hike at its next meeting. Thus, it would be a major shock if on Thursday the ECB did not raise its main policy rate from 1.25 per cent to 1.5 per cent.

Much more interesting will be what happens after that.