How to Fix Finance

How to Fix Finance - 1/16/2009

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2009 News and Press Releases

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News	News 2009
HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

HEADLINE NEWS:

How to Fix Finance, An Influential Group Makes Some Provocative Proposals For Re-Regulating Global Finance.
Staff Writer

CFO.com. January 16, 2009
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EXCERPT: With the fires still raging, scorching industry after industry, it might seem premature to ask what should rise from the ashes. But policymakers are understandably keen to start work on redesigning their financial systems. If 2008 was the year when the flaws in the old model became painfully clear, 2009 is likely to be the one when governments embrace re-regulation in an effort to fix it. A weighty report published on Thursday January 15th is sure to play a crucial role in shaping the agenda. […] The report also calls for raising the level at which banks are considered to be well-capitalised. This should be expressed as a broad range, it says, with the expectation that banks will operate at the upper end when markets are frothy. The recommendations concerning non-bank financial institutions—the so-called "shadow" banking system that has contributed so much of the pain—are no less radical. One proposal is sure to make the hair stand up on hedge-fund managers' necks: pools of private capital that live on borrowed money should have to register with a regulator and produce regular reports, disclosing things such as leverage and performance. The biggest of them would even be subject to capital and liquidity standards. The report even recommends bank-like regulation for money-market funds that give assurances about maintaining a stable net-asset value, as most presently do. And it calls for legislation in America to set up a mechanism for dealing with non-bank failures, the lack of which has caused no end of regulatory consternation. For banks and non-banks alike, the report calls for a more refined analysis of liquidity in stressed markets and more robust contingency-planning. Central banks should have a stronger role in policing such things, the authors argue, and need to be especially vigilant in good times, when credit is expanding quickly.

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