Wall Street Journal (January 17)
Over the past 5 years, the EU has been suffering from “a kind of schizophrenia about the role that credit-rating agencies such as Moody’s, Standard & Poor’s and Fitch should play in the markets.” Some of the reforms have been hare-brained, like trying to silence downgrades, but the latest package is on target with a proposal to write the agencies out of EU law. “Denying ratings any sort of official status is the best reform for a business that has long dined out on the privileged position that regulators granted them. It should also really be the only reform you need.”
Tags: Credit-rating agencis, EU law, Fitch, Moody's, Official status, Regulators, S&P
Institutional Investor (September Issue)
Is the financial system safer “after four years of summit meetings, regulatory conclaves, landmark legislation and detailed rule-writing—all of it aimed at ensuring that the financial system would never again crash the global economy or force taxpayers to underwrite costly bailouts?” Many things appear to have changed for the better and the regulatory stance is more aggressive, yet some of the changes may be releasing new risks that could surpass anything we’ve seen before. “The answer is not simple.”
Tags: Bailout, Economy, Financial system, Regulators, Risk, Safety, Taxpayers
Advanced Trading (September 27)
Despite several major incidents upsetting markets, “U.S. regulators have been slow to act” to regulate high-frequency trading. Germany, Canada, Australia, the EU and other countries, however, are moving ahead. Approaches include transaction fees and minimum time requirements before orders can be cancelled. These countries “think that by acting now, they can protect their markets against the types of technological disruption we’ve seen here. Let’s wait and see if it works.” High-frequency trades now account for 65% of U.S. stock trading and 45% of European stock trading.
Tags: Australia, Canada, Germany, High frequency trading, Regulators, the EU, U.S.
New York Times (August 2)
An automated trading program went amok at Knight Capital Group, flooding the NYSE and other markets with orders at the opening bell. This “was the latest black eye for the financial markets. The runaway trading suggests that regulators have not been able to keep up with electronic programs that increasingly dominate the supercharged market and have helped undermine investor confidence in stocks.” Some of the trades were cancelled when markets returned to order at 10:15, but Knight is expected to take a large loss.
An automated trading program went amok at Knight Capital Group, flooding the NYSE and other markets with orders at the opening bell. This “was the latest black eye for the financial markets. The runaway trading suggests that regulators have not been able to keep up with electronic programs that increasingly dominate the supercharged market and have helped undermine investor confidence in stocks.” Some of the trades were cancelled when markets returned to order at 10:15, but Knight is expected to take a large loss.
Tags: Automated trading, Knight, Markets, NYSE, Regulators
Financial Times (July 29)
Regulators need to achieve “a complete redesign of audits and the way auditors deliver them.” Currently, auditors provide questionable value. “Did auditors give shareholders any advance warnings about failures and losses at Royal Bank of Scotland, Northern Rock, Anglo Irish, MF Global, Lehman Brothers, Bear Stearns, AIG or Barclays? US companies spend nearly $50bn annually on the ‘Big Four’ (PwC, Ernst & Young, Deloitte and KPMG) but the auditor rarely speaks or is questioned at annual meetings.”
Regulators need to achieve “a complete redesign of audits and the way auditors deliver them.” Currently, auditors provide questionable value. “Did auditors give shareholders any advance warnings about failures and losses at Royal Bank of Scotland, Northern Rock, Anglo Irish, MF Global, Lehman Brothers, Bear Stearns, AIG or Barclays? US companies spend nearly $50bn annually on the ‘Big Four’ (PwC, Ernst & Young, Deloitte and KPMG) but the auditor rarely speaks or is questioned at annual meetings.”
Tags: Audits, Big Four, Deloitte, Ernst & Young, KPMG, PwC, Regulators, Shareholders
Wall Street Journal (July 6)
The scandal over manipulation of the London Interbank Offered Rate (Libor) is “more proof of the failing wizardry of the First World’s monetary-cum-banking arrangements.” During the crisis, regulators relied on “questionably legal improvisations” to keep the whole system afloat. A rise in Libor could have set off a panic. “The larger lesson isn’t that bankers are moral scum, badder than the rest of us. The Libor scandal is another testimony (as if more were needed) of just how lacking in rational design most human institutions inevitably are.”
The scandal over manipulation of the London Interbank Offered Rate (Libor) is “more proof of the failing wizardry of the First World’s monetary-cum-banking arrangements.” During the crisis, regulators relied on “questionably legal improvisations” to keep the whole system afloat. A rise in Libor could have set off a panic. “The larger lesson isn’t that bankers are moral scum, badder than the rest of us. The Libor scandal is another testimony (as if more were needed) of just how lacking in rational design most human institutions inevitably are.”
The New York Times (July 24)
Since Fukushima, “Americans have asked whether something just as horrible could happen here.” The odds of an earthquake/tsunami combination are low, but “the possibility that something equally unexpected and unplanned for could exceed current defenses at American plants cannot be discounted.” Regulators and operators should take stronger preventive measures. More specifically, they should follow the “thoughtful and common-sense recommendations” made by the Nuclear Regulatory Commission (NRC) task force that was assembled to review America’s nuclear preparedness in light of Fukushima.
Since Fukushima, “Americans have asked whether something just as horrible could happen here.” The odds of an earthquake/tsunami combination are low, but “the possibility that something equally unexpected and unplanned for could exceed current defenses at American plants cannot be discounted.” Regulators and operators should take stronger preventive measures. More specifically, they should follow the “thoughtful and common-sense recommendations” made by the Nuclear Regulatory Commission (NRC) task force that was assembled to review America’s nuclear preparedness in light of Fukushima.
Tags: Fukushima, NRC, Nuclear, Regulators, U.S.
Financial Times (December 28)
Investment banks must shrink, “both in terms of leverage and the risks they take, if they are to regain their legitimacy.” Investment bankers are ready to forget the last crisis and push on with maximizing profits. Taxpayers and regulators, on the other hand, do not want to take chances. The banks must not only reduce their leverage and risk, they must demonstrate that “they do a useful job” which benefits society.
Investment banks must shrink, “both in terms of leverage and the risks they take, if they are to regain their legitimacy.” Investment bankers are ready to forget the last crisis and push on with maximizing profits. Taxpayers and regulators, on the other hand, do not want to take chances. The banks must not only reduce their leverage and risk, they must demonstrate that “they do a useful job” which benefits society.
Tags: Investment banks, Leverage, Regulators, Risk
The Independent (November 1)
Nestlé, Heinz, General Mills and other companies are receiving praise for being ahead of the regulators. They have voluntarily committed to eliminating the use of Bisphenol A (BPA) in their products. BPA is used to strengthen packaging, ranging from bottles and cans to computers and medical equipment. Many scientists suspect BPA is an endocrine disrupter linked to cancer, heart disease and other ailments. BPA remains unregulated. The U.S. views BPA as a “concern,” especially to children, but the linkage has not been proven. The official position of the European Food Safety Agency remains that BPA poses no risk to humans.
Nestlé, Heinz, General Mills and other companies are receiving praise for being ahead of the regulators. They have voluntarily committed to eliminating the use of Bisphenol A (BPA) in their products. BPA is used to strengthen packaging, ranging from bottles and cans to computers and medical equipment. Many scientists suspect BPA is an endocrine disrupter linked to cancer, heart disease and other ailments. The U.S. views BPA as a “concern,” especially to children, but the linkage has not been proven and BPA remains unregulated. The official position of the European Food Safety Agency remains that BPA poses no risk to humans.
Tags: BPA, General Mills, Heinz, Nestle, Regulators
Wall Street Journal (September 9)
Will financial regulators meeting in Basel this weekend provide a miracle? The Wall Street Journal hopes regulators decide to double or even triple the amount of capital banks are required to hold against losses. This would reduce the risk that taxpayers will again have to bail out the banks.
Tags: Banks, Basel, Regulators
