Graham's Blog to 31st March 2011

Bank stress tests are now moving to centre stage. The ECB’s Bini Smaghi underlined that the success of these new tests depends on them being fully understood by market participants. He also ruminated on the importance of a bank’s internal auditors in detecting problems and alerting top managers (View Article). Paul Goldschmidt made the powerful point that restricting the inclusion of sovereign exposure to the trading book as opposed to the banking book needs further thought now that private credits to weak states is about to be given junior status (View Article)

According to McKinsey, European bank funding will be threatened as Basel III meets Solvency II. Bank Regulators want European banks to sell more long-term bonds but their insurance brethren are making the cost a serious obstacle to European insurers buying such debt. (View Article)

The role of internal auditors may be rising but the UK’s House of Lords called for a competition probe into the Big Four auditors’ oligopoly of external audit as they found that ‘complacency’ and ‘dereliction of duty’ of auditors contributed to the financial crisis. (View Article)

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