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friday question January 30, 2009

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One of Per Kurowski’s questions:

Why do we only have credit rating agencies and not any decent-jobs-creation ratings agencies or risk of climate change rating agencies?

fluency in english as an advantage in transnational policy-making January 29, 2009

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I assume that’s what this means. The eligibility criteria for membership in the EU’s Payment Systems Market Expert Group are:

(a) relevant demonstrable knowledge and expertise in the area covered by the mandate of the Group;
(b) recent practical expertise or experience;
(c) proficiency in a language which is customary in the sphere of finance, to a level which allows the expert to participate in discussions and draft reports in that language.

applying better regulation to the financial markets in 2009 January 28, 2009

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The EU Commission published its latest strategic review of Better Regulation in the European Union (COM(2009)15 (EN) (28 January 2009)) today. But it’s unclear how this applies in the context of the financial markets right now. For example, the document states:

Improving the quality of new initiatives is an essential part of the better regulation agenda. In line with international best practice, the Commission believes that the most effective way of creating a better regulation culture is by making those people who are responsible for policy development also responsible for assessing the impacts of what they propose.

Better stakeholder consultation is an aspect of this, and the document states that “For complex or sensitive proposals, Commission departments are encouraged to go beyond the 8 week minimum consultation period”. But responding to crisis has been used recently as a justification for not consulting extensively (for example with respect to the regulation of CRAs). And Charlie McCreevy’s critique of the acceptance of the use of value at risk models in prudential regulation is an implicit critique of over-reliance on the sort of stakeholders who express views about proposals for financial regulation.

cheesy problems in the eu January 16, 2009

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It seems to be hard to be a European cheese producer these days. Roquefort producers have sent some of their cheese to Barack Obama to protest the US tariffs designed to penalise the EU for not allowing hormone treated beef into the EU. Lithuania’s application to register a protected geographical designation for Germantas cheese (filed in the summer of 2005) was rejected (the decision was taken in December but it was officially published yesterday) by the Commission on the basis that the characteristics of the cheese were a result of its production method rather than of geography (seems like pretty standard stuff – but because only the Lithuanian text is authentic I don’t know if there’s anything I’m missing). And Italy is providing financial support to producers of parmesan.

i wish i could go to this conference January 16, 2009

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Next week the EESC is putting on a conference with the title: Rien ne va plus? Ways to rebuild the European Social Market Economy. I like the pun. The press release describes the event as follows:

The four speakers will present the two key objectives of the event: firstly to discuss measures to enable a rapid relaunch of the economy in order to avoid recession and other consequences for workers, and secondly to identify ways of redefining and improving the regulation of financial markets.

And it states an “assumption …. that self-regulation has proved to be a form of non-regulation” (which is perhaps a bit overstated, although I can understand the impulse).

miami global business forum – law school session January 13, 2009

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On Friday 16 January, from 8.30 am to 10.00 am, as part of the Global Business Forum which is taking place at UM, the Law School will hold a session on international commercial arbitration. The session will take place in the School of Business, Storer Auditorium, 1st floor, Aresty Building. The speakers will be Jan Paulsson, whose appointment to the Michael Klein Distinguished Scholar Chair at UM has just been announced, and John Rooney, a partner at Shutts & Bowen LLP whose work relating to international arbitration includes being designated as the Inter-American Bar Association’s representative to the arbitration working group of the United Nations Commission for International Trade Law (UNCITRAL). I’ll be moderating the session.

Here’s the description of the session:

– International Commercial Arbitration – Miami Style
Description: Globalization and international trade give rise to transnational disputes and, increasingly, businesses and governments are turning to international commercial arbitration as the preferred means of resolving their differences. Miami is poised to become a significant international arbitration venue, particularly for cases involving one or more Latin American parties, and important segments of large arbitration providers and the local bar have focused on this field as a growth industry. This panel offers a wealth of expertise for the benefit of the academic and practice communities.

indexed annuities: final rule January 9, 2009

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The SEC has issued final rules on indexed annuities. The release notes that the SEC received 4800 comments on the proposed rules and that the final rule has been modified to reflect some of the comments. Many of the comments were filed in standard formats.

A new rule 151A (which will come into force in 2011) defines a class of indexed annuities that are to be treated as securities requiring registration under the Securities Act of 1933. The release states:

The purchaser of an indexed annuity assumes investment risk because his or her return is not known in advance and therefore varies from its expected value. When the amounts payable to the purchaser are more likely than not to exceed the guaranteed amounts, the investment risk assumed by the purchaser of an indexed annuity is substantial, and we believe that the contract should not be treated as an “annuity contract” for purposes of the federal securities laws. We also note that indexed annuities are not, in fact, without the risk of principal loss. An indexed annuity purchaser who surrenders the contract during the surrender charge period, which for some indexed annuities may be in excess of 15 years, may receive less than his or her original principal. Unlike a purchaser of a fixed annuity, a purchaser of an indexed annuity is dependent on favorable securities market returns to overcome the impact of the surrender charge and create a positive return rather than a loss….


gao- us financial regulatory system outdated January 9, 2009

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Not a surprise, as the GAO has expressed similar views before, but yesterday’s GAO Report, Financial Regulation: A Framework for Crafting and Assessing Proposals to Modernize the Outdated U.S. Financial Regulatory System states:

As the nation finds itself in the midst of one of the worst financial crises ever, the regulatory system increasingly appears to be ill-suited to meet the nation’s needs in the 21st century. Today, responsibilities for overseeing the financial services industry are shared among almost a dozen federal banking, securities, futures, and other regulatory agencies, numerous self-regulatory organizations, and hundreds of state financial regulatory agencies. Much of this structure has developed as the result of statutory and regulatory changes that were often implemented in response to financial crises or significant developments in the financial services sector. For example, the Federal Reserve System was created in 1913 in response to financial panics and instability around the turn of the century, and much of the remaining structure for bank and securities regulation was created as the result of the Great Depression turmoil of the 1920s and 1930s.

It’s a pretty clear and useful report in general though I’m not so sure about the usefulness of the conclusions. The GAO begins its discussion of conclusions by saying that one of the major problems with the current system is a lack of clarity about the goals of financial regulation. And the example the report cites is as follows:

representatives of some regulatory agencies and industry groups emphasized the importance of creating a competitive financial system, whereas members of one consumer advocacy group noted that reforms should focus on improving regulatory effectiveness rather than addressing concerns about market competitiveness

I’m not persuaded that the real problem has anything to do with a lack of clarity about goals. The sort of untruthfulness about the likely risk of default of assets underlying securities that was a core part of the initial problem didn’t have anything to do with any lack of clarity about the goals of the financial regulatory system.

And this idea that has become so entrenched in debates about financial regulation that it’s necessary to choose between protecting consumers and allowing US financial institutions to be competitive is pretty corrosive stuff. And any debate that proceeds in this way isn’t likely to help us pull out of the hole we’re in.

post-kadi money-laundering regulation January 5, 2009

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The House of Lords EU Committee is beginning an inquiry into money-laundering controls post the ECJ’s recent Kadi decision.

The Committee will consider what impact the ruling of the European Court of Justice (EJC) in the Kadi case will have on EU efforts to tackle the problem. In the Kadi case the ECJ ruled that the EU could not implement a UN Security Council resolution to impose economic sanctions on Yassin Abdullah Kadi, an associate of Osama bin Laden, as Kadi had not had the opportunity to put forward his comments on the proposed sanction order. The case reflects an assumption by the ECJ that it has jurisdiction to review sanctions already imposed by the UN Security Council.

scenting the new year January 1, 2009

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Hilary Mantel at the Guardian writes about scent (or rather, perfume):

New year is a time for experiment, re-definition, and perfume is a fine place to start.

“Dull women”, it seems, wear the same scent all the time. Meanwhile, Now Smell This tells us that what we wore last night sets the tone for the year to come, and even invites readers to think of wearing something that smells like money….