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Trouble Looms for Western European Banks Exposed to Eastern Europe and The Former Soviet Block

February 18, 2009

Analysis of:Downgrades Loom for Hungary, Poland, Bond Yields Show | www.bloomberg.com

Increasing yields on East European and Former Soviet Union bonds and their sliding currencies means that the region could experience a crisis similar to the Asian crisis of 1997.  Western European banks, especially in Austria, Germany, Belgium, France and Italy are likely to be hard hit due to their significant exposures to the region. Estimates are that they might have to write off 20% of their exposures, further diminishing the banks' liquidity at a time that they are already so constrained. Western and central European governments already under significant pressure to come up with bank rescue plans are now further pressured as the East rapidly deteriorates. 

Battle Over Clearing Credit Default Swaps Continues

February 17, 2009

Analysis of:ICE plans European CDS clearer | www.ft.com

The Intercontinental Exchange (ICE) continues its efforts to become the first international clearer of credit default swaps. Yet, the European Central Bank's and the European Commission's insistence that a clearing house must be in Europe could thwart ICE's efforts.

Canadian and Spanish Banking Regulations Could Provide Useful Lessons

February 17, 2009

Analysis of:In Canada, G20 Sees Banking's Future | www.theglobeandmail.com

The G-20 are struggling to come up with uniform global banking standards for banks.  Even if they come up with uniform standards, they are at odds as to what organization could enforce the regulations globally.  Talks are that the Financial Stability Forum and the IMF could take up a great role.

Regulatory Turf Battles over CDSs and other OTC Derivatives

February 17, 2009

Analysis of:The Derivatives Markets Transparency and Accountability Act of 2009 | agriculture.house.gov

Understanding this regulation is key because it shows congressional appetite to increase regulation not only over CDSs but also other OTC derivatives.  Yet, a lot of detail is still missing as to how the CFTC would regulate CDSs and other derivatives.  Also, it is unclear whether funding would increase to hire and train personnel at CFTC who understand OTC derivatives, especially CDSs. Given that the CFTC's specialty is futures, it is critical to understand what CFTC intends to do to understand the OTC market.

Credit Default Swaps: The Fed's Increasing Oversight Role Over a Clearinghouse

November 13, 2008

Analysis of:Fed Said to Seek Oversight of Credit-Default Swap Clearinghouse | www.bloomberg.com

The Federal Reserve's potential regulatory role over a CDS clearinghouse is important to financial markets  participants, because it shows the Fed's increasing role in thawing credit markets and in the oversight of credit derivatives, and potentially others.  Moreover, a CDS clearinghouse is likely to be received well by global markets and it will cement the Fed's international leadership role in placating volatile credit derivative markets. Moreover, the Fed's oversight of a CDS clearinghouse is another signal that there is a need to add 'financial stability' to the Fed's mandate of maintaining full employment and price stability.

OPEC and Oil Trends

November 27, 2006

Analysis of:Saudi Oil Minister Backs OPEC Cuts | online.wsj.com

The article is important, because Saudi Arabia continues to be a significant player in OPEC.  However, what is key as well is how China, India, and the US will influence oil prices.  Moreover, for the US, the key is to focus on energy independence to improve our national security.

Implications of Loosening Basel II Rules

August 16, 2006

Analysis of:US banks seek looser Basel II rules | news.moneycentral.msn.com

US banks wanting looser Basel rules pits the banking lobby against US regulators.  Also, loosening the rules will induce more banks outside of the US, particularly in emerging markets, to want less stringent rules.

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