I'll have to get back to this for want of time but I've thought all along that it's only a matter of time before such issues are brought to light. Gillian Tett from the FT has a good piece on russian-doll finance (isn't that exactly, in a way, what this is?).
She credits Tucker with raising soft alarms back during the credit boom which would obviously lead you to question why it was only last week that the FSB released a report on the $67 trillion system that creates calamitous levels of systemic risk that barely anyone can measure?
The main emphasis here is on the internal working of the BoE and how it seems to have finally transitioned from a hands-off approach (really?). As Tett writes:
"Some regulators on both sides of the Atlantic tried to bridge that mental gulf. When Mr Tucker, for example, became head of markets at the BoE a decade ago, he realised the operations of CDOs and SIVs were affecting the flow of credit. He even suggested an analysis of “vehicular finance” should be incorporated into discussions of monetary aggregates, such as M4.
More on shadow banking soon (hopefully).
She credits Tucker with raising soft alarms back during the credit boom which would obviously lead you to question why it was only last week that the FSB released a report on the $67 trillion system that creates calamitous levels of systemic risk that barely anyone can measure?
The main emphasis here is on the internal working of the BoE and how it seems to have finally transitioned from a hands-off approach (really?). As Tett writes:
"Some regulators on both sides of the Atlantic tried to bridge that mental gulf. When Mr Tucker, for example, became head of markets at the BoE a decade ago, he realised the operations of CDOs and SIVs were affecting the flow of credit. He even suggested an analysis of “vehicular finance” should be incorporated into discussions of monetary aggregates, such as M4.
But he faced at least two big obstacles in raising interest.
First, it was unclear who was responsible for analysing, let alone policing, this non-bank world. For while the FSA was watching the micro-level operations of banks, and the BoE was monitoring macro financial stability, CDOs and SIVs fell between the cracks.
Second – and more subtly – the silo mentality was so entrenched that Mr Tucker did not even have the words to communicate his fears. He knew the phrase “non-bank finance” sounded boring, so he tried to come up with alternatives. But they failed to grab attention."
More on shadow banking soon (hopefully).
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