Financial regulators in Europe are buttressing banks to contain strains in the energy market and to stop them morphing into a full-blown financial crisis.
Liquidity
UK pensions ‘time-bomb’ sounds global financial stability warning
Severe volatility in the UK’s government bond (gilts) market triggered by the unravelling of a pension fund investment strategy is a clear warning sign of other dangers lurking in a leveraged financial system.
Banks fear digital euro becoming a ‘liquidity vampire’
The ECB is investigating launching a digital euro to future-proof the single currency and to defend its sovereignty. But creating a new form of money that is poorly calibrated poses substantial risks to the liquidity of deposit-takers.
‘Lenders of last resort’ need to incentivise firms to hold more liquidity
Expanding the lender of last resort function to tackle financial distress is likely to work better when financial firms are incentivised to manage their liquidity risks in a socially responsible way.
Fed’s Brainard calls for lessons to be learned from Covid-shock
The market turmoil caused by measures to contain the spread of the Covid-19 pandemic, which necessitated massive public sector emergency support, underscores the need to make sure the financial sector can withstand a wide range of shocks, a Fed official has said.
Bank of England speech revives UK negative interest rate speculation
A speech from a Bank of England official has rekindled speculation that the central bank might be seriously considering cutting the UK base rate, currently at 0.1%, into negative territory saying this could provide a significant economic stimulus.
FSB calls on G20 to address shadow bank risks following March volatility
Following market turmoil in March, the Financial Stability Board (FSB) has called for vulnerabilities in non-bank financial intermediation (NBFI) to be addressed.
ESMA instructs exposed funds to prepare for future shocks
Investment funds with significant exposures to corporate debt and real estate assets have been told by the European Securities and Markets Authority (ESMA) to anticipate potential future adverse liquidity and valuation shocks.
US agencies finalise NSFR rule with some tweaks
Proposals over measures to ensure the resilience of banks during periods of financial stress in the US have been revised and a rule finalised, with the latter coming into force in mid-2021
US Treasury market still dogged by liquidity threats
The US Treasury market still has the potential to experience sudden liquidity droughts, such as those witnessed in March and April as the Covid-19 pandemic unleashed a wave of volatility across markets.
@RiskRegulator
