Lagarde’s ECB Checklist

Jul 26, 2019 Stefan Gerlach, Project Syndicate

Stefan Gerlach is Chief Economist at EFG Bank in Zurich and a former deputy governor of the Central Bank of Ireland. He is also a former Executive Director and Chief Economist of the Hong Kong Monetary Authority and Secretary to the Committee on the Global Financial System at the BIS.

After years in which the European Council acted as if there were no qualified women to lead the European Central Bank, it has finally abandoned that ludicrous excuse and appointed Christine Lagarde to the position. Lagarde is an eminently qualified and promising president-designate; but to have a successful tenure, she will need to head off her critics‘ concerns.

ZURICH – The surprise nomination of Christine Lagarde to serve as the next president of the European Central Bank has pleased many observers, including me, and disappointed others. Those who are pleased feel that Lagarde’s eight-year term as Managing Director of the International Monetary Fund makes her uniquely qualified to forge agreement within the ECB’s Governing Council on many of the contentious issues it faces.

Chief among these are the eurozone’s current downturn and the potential review of its monetary-policy framework that has been proposed by Olli Rehn, Governor of the Bank of Finland. Considering that the ECB’s most influential members appear to have different views about the framework and how it might be changed, reaching a consensus will not be easy.Nonetheless, those who support Lagarde’s nomination believe that her time serving as France’s finance minister has left her ideally suited to work with the eurozone member states’ governments – and to convince them to marshal a collective fiscal response in the event of a severe downturn.

The regulatory woes of Big Tech multiply

Date: 25-07-2019
Source: The Economist

But the titans may yet emerge unscathed

“How did you go bankrupt?…Gradually and then suddenly.” Many technology entrepreneurs know this quote, from a novel by Ernest Hemingway—and often, from experience. The words have, of late, taken on new meaning. After years during which tech’s titans could do no wrong, they are now being pulled into a vortex of regulatory woes that make headlines almost daily. Big Tech is not about to implode. But will it come out intact?

The latest burst of antitrust activity came on July 24th, when Facebook said that the Federal Trade Commission (ftc), an American regulatory agency, had launched an investigation into the company. The news came soon after the ftc released details of a much-anticipated privacy settlement with the firm.

The social network will pay a $5bn fine for violating a previous privacy deal with the ftc. But Facebook also agreed to formalise its privacy processes, for instance by creating a special committee on its board and by designating compliance officers. Its boss, Mark Zuckerberg, will also have to certify the firm’s compliance—which could make him personally liable should Facebook fail to get its act together.

A day earlier, America’s Department of Justice announced that it would look into how big online platforms have achieved market power and whether they abuse it. The doj did not say which firms it had in mind, but Google is likely to be one. The department’s lawyers are reportedly already preparing to investigate it.

Trustbusters on the other side of the Atlantic—who have already fined Google more than €8.2bn ($9.3bn) in recent years—are not resting on their laurels. On July 17th Margrethe Vestager, the European Union’s competition regulator, announced that her department had opened an investigation into whether Amazon uses the data it collects from merchants’ sales on its sites to push its own products. Insiders expect the eu’s next target will be Apple, which stands accused of using its control of the app store on its iPhones to favour its own services, mainly Apple Music.

The Great Crypto Heist

Jul 16, 2019 Nouriel Roubini, Project Syndicate

Nouriel Roubini, a professor at NYU’s Stern School of Business and CEO of Roubini Macro Associates, was Senior Economist for International Affairs in the White House’s Council of Economic Advisers during the Clinton Administration. He has worked for the International Monetary Fund, the US Federal Reserve, and the World Bank.

Cryptocurrencies have given rise to an entire new criminal industry, comprising unregulated offshore exchanges, paid propagandists, and an army of scammers looking to fleece retail investors. Yet, despite the overwhelming evidence of rampant fraud and abuse, financial regulators and law-enforcement agencies remain asleep at the wheel.

NEW YORK – There is a good reason why every civilized country in the world tightly regulates its financial system. The 2008 global financial crisis, after all, was largely the result of rolling back financial regulation. Crooks, criminals, and grifters are a fact of life, and no financial system can serve its proper purpose unless investors are protected from them.

If capitalism is broken, maybe it’s fixable

Date: 10-07-2019
Source: The Economist

A book excerpt and interview with Joseph Stiglitz, a Nobel laureate in economics and author of “People, Power and Profits”

FOR DECADES Joseph Stiglitz has argued that globalisation only works for a few, and government needs to reassert itself in terms of redistribution and regulation. Today the sources of his ire have grown more dire. Wealth inequality has become a hot-button political issue just as populists are on the march.

In Mr Sitglitz’s latest book, “People, Power, and Profits: Progressive Capitalism for an Age of Discontent,” he expands on his left-of-centre economic prescriptions. He believes that capitalism’s excesses can be tamed by the state providing a “public option” in areas like health care or mortgages when the market flounders.

As part of The Economist’s Open Future initiative, we conducted a short, written interview with Mr Stiglitz about his ideas. It is followed by an excerpt from his book, on what he calls “the transition to a postindustrial world.”

* * *

The Economist: You argue that right-wing populists aren’t wrong—capitalism is indeed rigged. How so?

ZEHN JAHRE DANACH: WENIGER WÄRE MEHR!

Wilfried Stadler, Bankarchiv 7/2019

Eine kritische Zwischenbilanz zu Fragen der Bankenregulierung und Finanzmarktstabilität

Am Montag, dem 15. September 2008 stürzte die Pleite der Investmentbank Lehman Brothers das internationale Bankensystem in seine tiefste Krise seit den Dreißigerjahren. Die Zahlungsunfähigkeit des noch am Freitag davor als unsinkbares Schiff geltenden Finanz-Kolosses löste eine Kaskade von drastischen Folgewirkungen aus. Das ominöse Datum hat sich auch deshalb tief im kollektiven Gedächtnis eingenistet, weil sich die Finanzkrise gerade in Europa in der Folge zu einer handfesten politischen Krise ausgewachsen hat. Ein gutes Jahrzehnt danach scheint die Bankenwelt bei oberflächlicher Betrachtung wieder weitgehend in Ordnung zu sein. Dennoch liegt eine neue Normalität wohl noch in weiter Ferne.

Eine Überfülle an seit damals in die Welt gekommenen Regulierungen bietet vermeintlichen Schutz vor neuerlichen Blitzgewittern. Die permanente Vermessung des Handelns aller Mitwirkenden erweckt den Anschein der Messbarkeit ihres Tuns. Doch weder das Regulierungsausmaß noch die Treffsicherheit der seit der Finanzkrise ins Uferlose angestiegenen Anforderungen können überzeugen. In beiden Bereichen besteht hoher und durchaus dringender Handlungsbedarf.

Zwei Beispiele seien stellvertretend für zahlreiche andere genannt:

BRETTON WOODS UND DIE G20

FURCHE-Kolumne 270 Wilfried Stadler,

Dass globale Probleme nur dann lösbar sind, wenn die gewichtigsten Spieler der Weltwirtschaft nach gemeinsamen Regeln suchen, hat die Finanzkrise 2008 höchst unsanft in Erinnerung gerufen. Seit damals treffen deshalb die Spitzen von 19 führenden Wirtschaftsnationen, ergänzt um den Präsidenten der EU-Kommission, regelmäßig zusammen. Sie repräsentieren nicht weniger als 85 Prozent der globalen Wirtschaftsleistung.

US-Präsident Trump nützte den jüngsten G20-Gipfel in Japan zu einer weiteren Demonstration jener Taktik des „divide et impera“, die seinem Narzissmus so entgegenkommt. Bilaterale Treffen mit Xi Jiping, Angela Merkel oder Wladimir Putin sollten wieder einmal alles in den Schatten stellen, was sonst noch am gemeinsamen Konferenztisch besprochen wurde. Der Abstecher nach Nordkorea war die Draufgabe zur Ego-Show.

Ob ihn wohl irgendjemand darauf aufmerksam gemacht hat, dass das Treffen in Osaka mit dem 75. Jahrestag des Abschlusses der Konferenz von Bretton Woods im US-Bundesstaat New Hampshire zusammenfiel – und wie anders die Rolle der Vereinigten Staaten damals war?
Im Sommer 1944 glückte den Vertretern von 44 Ländern nach dreiwöchigen Verhandlungen ein Schlussdokument, in dem die Eckpfeiler der Nachkriegs-Wirtschaftsordnung fixiert wurden. Das Ende des Weltkrieges war damals trotz der erst kurz zuvor geglückten Landung der Alliierten in der Normandie noch nicht endgültig absehbar. Den Vorsitz über die meist bis tief in die Nacht andauernden Gespräche führte John Maynard Keynes, der renommierteste Ökonom seiner Zeit.

EU-Banken fehlen 135 Milliarden Euro für neue Kapitalregeln

Gelder fehlen fast nur Großbanken

2. Juli 2019, 16:20, derstandard.at

Die EBA spricht von einer Kapitallücke.

Frankfurt – Banken in der EU brauchen nach einer Studie der EU-Bankenbehörde EBA 135 Mrd. Euro, um die künftigen Kapitalvorschriften zu erfüllen. Die vollständige Umsetzung der sogenannten Basel-III-Regeln würde die Mindestkapital-Anforderungen um 24,4 Prozent erhöhen, erklärte die EBA am Dienstag.

Die Kapitallücke trifft fast nur Großbanken, die weltweit aktiv sind. Von den 135 Milliarden Euro entfielen nur 0,9 Milliarden auf mittelgroße Geldhäuser und 0,1 Milliarden auf kleinere Institute.

Neue Kapitalvorschriften

The war on money-launderers’ vehicle of choice intensifies

Date: 01-07-2019
Source: The Economist

Some of the biggest offshore centres are increasing transparency about ownership

Financial crimes come in all shapes and sizes, from politicians siphoning off state wealth and officials taking bungs to terrorists buying arms and gangs laundering drug profits. A common element is the use of shell companies, partnerships or foundations to hide the identities of those moving dirty money. Such brass-plate entities, whose ownership is typically hard if not impossible to trace, were at the heart of the theft from 1mdb, a Malaysian state fund, and a $230bn money-rinsing scandal at Danske Bank. They have been dubbed the “getaway cars” of financial crime.

ngos such as Global Witness and Transparency International have long highlighted shells’ pernicious role, picking up support from government investigators sick of trails going cold. Their biggest success was to persuade Britain, in 2016, to become the first g20 country to set up a public register of company owners. The rest of the European Union is set to follow once a new money-laundering directive takes effect. That leaves plenty of gaps. But two of the biggest, Britain’s offshore territories and America, are also moving in the direction of ditching secrecy.

Ein Leitfaden für Finanzkrisenmanager

May 28, 2019 Howard Davies, Project Syndicate

Howard Davies, the first chairman of the United Kingdom’s Financial Services Authority (1997-2003), is Chairman of the Royal Bank of Scotland. He was Director of the London School of Economics (2003-11) and served as Deputy Governor of the Bank of England and Director-General of the Confederation of British Industry.

EDINBURGH – Journalisten, so heißt es, verfassen „eine erste grobe Version der Geschichte”. Es ist ein großer Anspruch, aber die Besten unter ihnen kommen dem nahe. Während der Großen Finanzkrise 2008 gelang es Andrew Ross Sorkin von der New York Times mit seinem Buch Die Unfehlbaren. Es ist noch immer eine zutreffende Beschreibung dessen, was an der Wall Street los war, als die Märkte zusammenbrachen. Sorkin hatte einen guten Zugang zu den beteiligten Schlüsselpersonen. 

Die zweite Version der Geschichte wird oft von den wichtigsten Beteiligten selbst geschrieben. Nach dem Zweiten Weltkrieg war Winston Churchill zuversichtlich, die Geschichte würde ihn freundlich behandeln, weil er beabsichtigte, „diese Geschichte selbst zu schreiben”. Als die Finanzkrise ausbrach, könnte derselbe Gedanke auch Hank Paulson, Ben Bernanke und Tim Geithner angetrieben haben, die US-Finanzminister, Vorsitzender der Federal Reserve Bank und Präsident der New York Fed waren.

The past decade has brought a compliance boom in banking

Date: 30-04-2019
Source: The Economist

Staff trying to keep banks on the right side of regulators are in high demand

COMPLIANCE OFFICERS are the killjoys of finance. To bankers and traders keen to let rip, they are the po-faced types who, while generating no revenue themselves, frown at any transaction that might breach this rule or contravene that regulation. A recent episode of “Billions”, a television drama about Wall Street, captured the rainmakers’ frustration: so fed up is “Dollar” Bill Stern with having his wings clipped by Ari Spyros that the veteran trader rams the side of the compliance chief’s Porsche (pictured above) when he pulls out of the car park of their hedge fund, Axe Capital.

But pity not finance’s in-house policemen, for they have had a golden decade since the crisis. While swathes of banking has laboured under cutbacks and stiff capital requirements, compliance departments’ headcount and clout have grown. Banks clobbered by fines for aiding corruption, money-laundering and sanctions-busting have beefed up their compliance, risk, legal and internal-audit teams. Compliance officers will never be the rock stars of finance, but they have moved from drums to rhythm guitar. And though some banks hint at having reached “Peak Compliance”, staffing and investment are likely to remain well above pre-crisis levels.