The first item is the international response to the mixing of retail and investment banking. These were legally separated in the USA until Clinton’s administration repealed the Glass-Steagall Act, and were followed de facto elsewhere. This attempts to solve the problem by bureaucratic means and tortuous rules. My personal preference would be to revive that US Act rather than involve an army of bureaucrats. Under the original system if a bank made a foolish investment it - and nobody else - would go bust.
The second item, the nine-month survey is sent largely for the record and for comparative figures.
Christina
FINANCIAL TIMES 14.7.09
EU seeks to double cost of banks’ bets
By Patrick Jenkins and Brooke Masters in London
Europe’s banks will find the practice of betting with their own money twice as expensive in future, cutting their profits, under the terms of a proposed European Union directive published on Monday.
The proposal, which coincided with the publication of draft global rules by the Basel Committee on Banking Supervision that went in the same direction, would require banks to “roughly double current trading book capital requirements”, the European Commission document said.
Proprietary, or “prop” trading, whereby banks use their own money to bet on trading positions, has been lucrative for banks for years. But some in the ind?ustry believe that the rule changes could make the practice far less economic.
“This is the first time we’ve actually seen a number. It’s what people were expecting,” said Michael Raffan, a partner at Freshfields.
Simon Gleeson, a partner at Clifford Chance, said the Commission’s proposed rule changes were “not as bad as they could have been” for the banking industry.
The toughest clampdown would come for banks’ holdings in so-called “resecuritisations”, financial products that are derived from existing securitisations. Such repackaging of already packaged securities is widely deemed to be more risky than had been generally accepted before the financial market crisis.
The Commission proposal also spells out how regulators plan to make banks do a better job of understanding and explaining the risks they run when they resecuritise assets into collateralised debt obligations.
If the bank cannot demonstrate that it has done the necessary due diligence, then it will have to multiply the CDO by 12? times in calculating its risk weighting for capital requirements. The rule would apply only to new resecuritisations issued from 2011.
The proposals are not final and are likely to be amended after consultation, UK officials say.
The remuneration proposals – suggesting that pay should be linked to risk, though the Commission gave scant detail – are closely aligned with the Financial Services Authority’s proposal on pay, UK officials also say.
Senior US officials say they have so far shied away from specifying what the new capital requirements will be. They are afraid that announcing the rules could weaken banks that would have to rush to deleverage ahead of them.
But on Monday the Basel Committee announced it had adopted the final version of its new rules, which will force banks to tie up more capital to offset risky trading-book activities.
The reforms to the so-called Basel II rules, which prescribe capital allocation for banks in the bulk of the world’s main markets, are designed to make the rules less prone to the distortions of market downturns and upturns.
Like those of the Commission, the Basel Committee’s rule changes will also demand that more capital is held against resecuritised products, as well as better disclosure of securitised assets. But full details will not be published until later in the year.
EU OBSERVER 13.7.09
Britain and France record highest June job cuts
LUCIA KUBOSOVA
Job losses across the European Union continue to outnumber job gains, with the highest number of announced lay-offs recorded in June in France and Britain, a fresh EU report showed.
The situation in the labour market in the 27-member bloc keeps deteriorating, according to a monthly monitor conducted by the European Commission and published on Friday (10 July).
The report points out that between September 2008 and June of this year, some 640,000 jobs disappeared while 219,000 posts were created. Last month alone there were 87 cases of restructuring-related job losses, which led to 50,000 workers being put out of work.
France with 19,625 announced lay-offs and Britain with 11,528 jobs to go, topped the June list of EU countries with the highest number of restructuring cases in the labour market, followed by the Czech Republic (3,070), Poland (2,310), Germany (1,960) and (1,950).
Manufacturing and education were among the sectors most affected by lay-offs last month, accounting for almost two-thirds of announced job losses, 33,000 out of a total of 50,000.
While manufacturing has proven to be the most damaged sector – almost 340,000 jobs have been lost since last September, half of the total job losses – the June statistics in education result from plans by the French education ministry to next year not refill the some 16,000 posts of departing staff.
Another area reporting significant job cuts last month was financial services with 8,000 jobs lost, including over 4,500 posts in the UK's Lloyds Banking Group.
Over a longer period, the retail sector has registered the most large-scale closures and lay-offs, with companies such as the UK's Woolworths and Stylo as well as Germany's Arcandor most indicative of the sector's difficulties.
Despite the new figures however, the highest unemployment rates continue to be recorded in Spain (18.7%), Latvia (16.3%) and Estonia (15.6%), according to the latest figures by Eurostat, the EU's statistics office.
On a slightly more positive note, some 10,000 jobs were announced in June, with 8,000 in the manufacturing sector, most significantly in Polish shipyards at Szczeczin (3,000 jobs) and Gdynia (2,000 jobs) and in the Czech Republic's Kutna Hora (1,000 jobs).
Brussels' report claims that although unemployment continues to rise across Europe and the labour market outlook for the coming months remains bleak, "there are increasing signs that the pace of deterioration is moderating."
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