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14 April 2015

109th Brussels for Breakfast

Topics covered included Greece, Brexit, BIS on Achilles Heel of financial system, Commissioner Hill speeches, Eurogroup President succession, Commission management re-shuffle, ESA budgets, bank break-up and CCPs (ECB speech, BoE/ECB agreement), among others.

(Hosted by the BBA and organised by the CSFI – with Graham Bishop and Huw Jones (Reuters) and Simona Amati (Kreab). 

(After this event, Graham Bishop went to CISI for a 30 minute discussion that is CPD-eligible for CISI members – and others. Please click here for full details of our structured/unstructured CPD products)

Other topics tackled were collateral shortage, Solvency II and infrastructure investments, CSAs, cross-selling to retail and IAS7 on net debt reconciliation.

"At the Eurogroup (meeting) of April 24 there must be a preliminary conclusion (of the talks), as per the Eurogroup accord on Feb. 20," Greek Finance Minister Varoufakis said as Greece submitted new list of reforms to Eurogroup. It is the Greek government’s most comprehensive effort so far to unlock bailout funds before it goes bankrupt. The Financial Times reported the lawyers and economists were warning that any Greek detachment from the single currency union would probably be a great deal more complex and messier than previously thought. However, the sense of the meeting was rather more sanguine!

The BIS – hardly a hot-bed of revolutionaries - published a report on the international monetary and financial system: Its Achilles heel and what to do about it.  Claudio Borio argued the system amplifies the "excess financial elasticity" of domestic policy regimes, i.e. it exacerbates their inability to prevent the build-up of financial imbalances, or outsize financial cycles, that lead to serious financial crises and macroeconomic dislocations. His chart shows the sharply increasing amplitude of the financial cycles over the past 40 years and provides food for thought for anyone who thinks the current wave of regulation will have made the world a safe place.

ECB’s Coeure said that “CCPs are now 'super-systemically important' so they must be able to cope with even extreme losses… Regulators need to think the unthinkable”. The ECB and the BoE agreed enhanced arrangements for information exchange and cooperation regarding UK Central Counterparties with significant euro-denominated business – but without pre-committing to providing liquidity. This brief announcement provoked intense discussion on the real implications, and what steps will come next.

© Graham Bishop

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