Monthly Archives: October 2011

Claire Jones

The Swiss National Bank’s decision to cap the franc’s gains against the euro was a big gamble.

However, the SNB’s interim results for the year to September, out today, show that – so far – it’s paying off. For the first time this year, the central bank is back in black. And that’s partly down to the cap.

The results also offer some clue as to the size of the SNB’s interventions into foreign exchange markets. Read more

Ralph Atkins

A European Central Bank research paper has taken a look at an issue deeper than the eurozone debt crisis – the impact of religion on economies.

The study does not represent official ECB views, but it is nevertheless interesting that it has been published. The ECB’s research output gives a flavour of its internal debates and perhaps European cultural divergences are on its mind. Read more

Claire Jones

The emergence of a vicious circle between the health of a sovereign’s finances and that of its banks threatens the eurozone’s stability.

If markets’ fears of haircuts on sovereign debt wipe out banks’ capital buffers, then that would necessitate a recapitalisation. But a recapitalisation could, in turn, push states’ debt-to-GDP ratios above levels investors consider sustainable.

But, luckily, research which appeared on on Sunday, based on a paper published by the think tank Bruegel earlier this month, indicates that, at present, the problem is confined to Greece.

Policymakers should be relieved. However, that the problem can be observed in Greece’s case highlights just how essential it is for the eurozone authorities to avoid any talk of haircuts for the likes of Italy.  Read more

Claire Jones

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Draghi takes the helm

Will Mario Draghi preside over a rate cut during his first week as European Central Bank president?  Read more

Claire Jones

Officials around the world agree that macroprudential policy is an important tool for safeguarding the stability of their financial systems. But there is less consensus on what does and doesn’t count as a macroprudential policy tool.

In an effort to provide some much needed clarity, then, the Financial Stability Board, Basel Committee and International Monetary Fund have today released a guide.

But their reading of what doesn’t count is contentious.  Read more

Claire Jones

Among the timeliest pieces of economic research produced this year has been the Committee for the Global Financial System paper that identified a “vicious circle between the conditions of public finances and those of banks”.

The reluctance of Mr Sarkozy to spend French taxpayers’ money to prop up the country’s lenders for fear that this may cause France to lose its triple-A rating, further hurting those same investments,  is just one example of this vicious circle.

It could be seen as embarrassing for regulators that they allowed banks to treat high-grade sovereign debt as though it was risk free, given that it has since been proven to be anything but.

Hervé Hannoun, the deputy general manager of the Bank for International Settlements and former Banque de France deputy, offered his take on regulators’ treatment of sovereign debt on Wednesday. Those hoping for an apology might be disappointed.    Read more

Ralph Atkins

UPDATE (17.30 FRANKFURT) I now have the official English version, according to which Mr Draghi said the ECB ”is preventing, with its use of non-standard measures, the malfunctioning of the money and financial markets from obstructing the monetary transmission mechansism”. In that context, he mentioned bank liquidity support – but not bond buying. He added “All the non-standard measures adopted in response to the financial strains are, by their nature, temporary”. Sounds as if it was scripted by the ECB in Frankfurt.

Mario Draghi has his own way of promoting central bank opaqueness: speaking in Italian. I suppose that’s allowed when in Rome – where he spoke this morning - but it does not help understanding of his thinking ahead of his move to Frankfurt next week to become European Central Bank president.

The news agencies have picked up his commitment to continuing the ECB’s “non-standard” measures. “The Eurosystem is determined, with its non-conventional measures to prevent malfunctioning in the money and financial markets creating an obstacle to monetary transmission,” Reuters quotes him as saying, and suggests this was a signal that he will continue the ECB’s controversial government bond buying programme. Maybe, but pending the arrival of an English text, I am not so sure.  Read more

Claire Jones

St Peter's Square. Image by Getty.

St Peter's Square. Image by Getty.

Tired of all the talk of currency wars, the Holy See wants peace.

The Vatican this week called for G-20 leaders, meeting in Cannes early next month, to set up a global central bank. The Pontifical Council for Justice and Peace’s statement is only available in Italian but here’s an article from the Telegraph:

Such an authority would have “universal jurisdiction” over governments’ economic strategies.

Existing financial situations such as the World Bank and International Monetary Fund were outdated and no longer able to deal with the scale of the global financial crisis, which had exposed “selfishness, greed and the hoarding of goods on a grand scale”.

The global financial system was riddled with injustice and failure to address that would lead to “growing hostility and even violence”, which would undermine democracy.

The church’s call for action is not dissimilar to a point made by some of the world’s leading economists. Read more

Claire Jones

Mervyn King

Mervyn King. Image by Bloomberg.

Welcome to our live blog on Sir Mervyn King’s appearance at the Treasury Select Committee.

The governor is joined by Charlie Bean, deputy governor for monetary policy. The have been called before the committee to field questions on the Monetary Policy Committee’s decision to restart its asset purchases.

11.25 The live blog is now closed.

11.25 Here are the key takeaways from today’s session. Read more

Robin Harding

The New York Fed has published the agenda and opening remarks of its annual meeting with its bond dealers for the first time. Brian Sack, manager of the System Open Market Account, ran dealers through the Fed’s recent policy moves: Read more