Tuesday, October 27, 2009

Asleep at the Wheel

The Senior Supervisors Group is an august body of 10 financial market regulators, with a very heavy representation from North America (Fed, Fed NY, SEC, the quaintly named Comptroller of the Currency and Canada’s Superintendant of Financial Institutions) and Europe (French Banking Commission, Swiss Financial Market Supervisory Authority, German Federal Financial Supervisory Authority and the UK’s Financial Services Authority).  Japan’s Financial Services Agency rounds out the ten.  So that’s:

North America 50%
Europe 40%
Asia 10%

Right.

The SSG has recently released an exciting report entitled Risk Management Lessons from the Global Banking Crisis of 2008.  Click here to see it.

A couple of things sprang to mind as I leafed through it:

  • The crisis of 2008?  I didn’t think 2009 was so hot either.
  • What’s with the cover page?

SSG Cover

  • The arrangement of logos is just too suggestive of something else:

SSG Cover

Wednesday, October 21, 2009

The man who would be Mervyn King

Merv had a bunch of very insightful things to say recently, reported here in the Torygraph.  Especially eye-catching was this view:

"It is in our collective interest to reduce the dependence of so many households and businesses on so few institutions that engage in so many risky activities. The case for a serious review of how the banking industry is structured and regulated is strong."

He added: "The belief that appropriate regulation can ensure that speculative activities do not result in failures is a delusion," adding: "It is hard to see how the existence of institutions that are 'too important to fail' is consistent with their being in the private sector."

Harping back to an old but related theme, if the risk free rate of return is 5% or thereabouts (before tax) and the banks are chasing 20% returns (after tax), presumably the differential between them represents a gigantic risk premium which doesn’t quite add up to their “too important to fail” tag.

Monday, October 12, 2009

Yet More Bill

Sept. 2009 and Bill Evans at Westpac continues to hold a big lead over the rest of the field:

image

Meanwhile the CBA has been asking the question: “How good are economic forecasters?”  A good question given where they are on the ladder.  Have a look at the article here.

One of the conclusions is:

But CommSec did find that a good approach for investors was to follow the consensus. An average of the
20 forecasters consistently outperformed the majority of individual forecasters over differing time periods. Of the 77 indicators tracked, the consensus economic forecast picked the direction of movement 78 per cent of the time. And on 60 per cent of occasions the consensus result was amongst the top forecasts.

Check their findings against the “Avg” indicator above – looks like pretty good advice to me.  The only better advice would be “follow Westpac” which would be reasonably courageous for a CBA economist.

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