All - Center for the Study of Financial Market Evolution (CSFME)

The Credit Crisis was an Epochal Event

by David Schwartz J.D. CPA | Tuesday, October 19, 2010 | All, Change Overview and Rationale, Disclosure Regimes

From July 2007 to March 2009, share prices for global banks fell by 75%. That erased US$5 trillion in shareholder equity. Considering all markets, McKinsey has estimated that the fall in global wealth was US$25 trillion. To put that in context, the lost wealth was nearly 45% of global GDP, or a half year’s wages for the entire working world. On that basis, says Bank of England’s Andrew Haldane, “asset price falls in the UK and US were as large as during the Great Depression.”

Regulators Will Engage Third-Parties When Appropriate

by David Schwartz J.D. CPA | Sunday, September 19, 2010 | All, Disclosure Regimes, Procedural Changes

Although much will be expected of regulators over the next several years, it is unlikely that their budgets will be enhanced commensurately. As a result, creative affiliations will be established with the private sector, to include in-house compliance professionals and external advisors.

Current thinking in regulatory reform

by David Schwartz J.D. CPA | Monday, June 28, 2010 | All, Change Overview and Rationale, Disclosure Regimes

Regulators have reported the conclusions of study groups looking into the causes of, and remedies for the Credit Crisis. A consensus of opinion exists as to causes, with a growing emphasis among larger central banks on the failings of liquidity risk management. All regulators believe new forms of infrastructure will be needed to prevent a recurrence of the conditions leading up to the Crisis. Larger central banks and securities regulators believe better monitoring within the existing infrastructure must be adopted as a global stopgap until the new infrastructures are created.

Risk Management Failed at Many Levels

by David Schwartz J.D. CPA | Friday, February 26, 2010 | All, Change Overview and Rationale, Disclosure Regimes

Regulators during the crisis were most concerned about the nearly unmanageable spike in systemic risk which, according to the IMF, FSB and BIS, is defined as “a risk of disruption to financial services that is caused by an impairment of all or parts of the financial system and has the potential to have serious negative consequences for the real economy.”

Central Banks should Monitor Counterparty Liquidity

by David Schwartz J.D. CPA | Thursday, February 25, 2010 | All, Disclosure Regimes, Procedural Changes

Through their open market operations, the trading desks at central banks gain first-hand knowledge of evolving stresses in the inter-dealer funding markets – information which can help to monitor systemic risks.

Improved Analytics Can Help to Monitor Systemic Linkages

by David Schwartz J.D. CPA | Thursday, February 25, 2010 | All, Disclosure Regimes, Procedural Changes

Dr. Franz-Christoph Zeitler, vice president of the Deutsche Bundsbank, speaking in Frankfurt on September 24, 2009, noted the failures of backward-looking quantitative risk measurement methods, such as value-at-risk or expected- shortfall models, which “have proved necessary but inadequate and should be supplemented by forward-looking instruments such as stress tests and scenario analyses, which also take into account changes in third party behaviour.” On the same day, Dr. Weber was speaking on the same topic, as were other central bankers around the world.

International Regulatory Cooperation will never be Easy

by David Schwartz J.D. CPA | Wednesday, February 24, 2010 | All, Disclosure Regimes, Formal Regulatory Remedies

In a recent speech by Norwegian central banker Svein Gjedrem, the case for broader involvement by smaller banks is laid out. Instead of the G20, Mr. Gjedrem argues that the 180-member International Monetary Fund should serve as the main decision- making body for the funding of systemic risk mitigators.

Funding Markets must be made more stable

by David Schwartz J.D. CPA | Wednesday, January 27, 2010 | All, Disclosure Regimes, Formal Regulatory Remedies

As recently as 4Q09, the European Central Bank was dealing with challenges in the funding markets, noting that, “Funding liquidity problems continue to bring pressure on the major banks’ operations. While the conditions have improved substantially in most funding segments throughout 2009, including the money markets, some of these institutions and parts of the broader euro area banking system, remain reliant on temporary support measures extended by the Eurosystem and governments.”

Integrated Markets led to ‘Shocking’ Instabilities

by David Schwartz J.D. CPA | Sunday, December 27, 2009 | All, Change Overview and Rationale, Disclosure Regimes

Prior to the Crisis, it was thought that diversification of counterparty networks would work to reduce systemic risk in the financial system.

More Intelligence is Needed from (and for) Market Participants

by David Schwartz J.D. CPA | Tuesday, December 22, 2009 | All, Disclosure Regimes, Procedural Changes

Regulators intend to increase the flows of bilateral information so as to isolate sources of risk as well as the ability of market participants to improve their risk management and business models. European Central Bank: Any well-functioning macro-supervisory framework needs the support of market participants, because a rigorous monitoring of systemic risks will require continuous market intelligence.

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