Trésorier/Treasurer magazine - N°86 - Jul/Aug/Sep 2014 - (Page 65)

The Risk Observatory by Hugues Pirotte (FinMetrics) Hugues Pirotte The urgent need to foster liquidity in the real economy comes in parallel to more stringent regulatory needs and the associated clearing obligations or collateral requirements attached to uncleared transactions. Ralf Lierow of Siemens Treasury is one of the corporate treasurers stressing the fear that less OTC availability could harm substantially hedging activities. Although late, we see more and more professionals standing up for the benefits of derivatives' activities contrasting with the unilateral bashing On ISDA and OTC derivatives, its chairman highlighted the need to stop blaming OTC derivatives and change the perception we might have about them since they serve the wider economy, during the annual general meeting of ISDA in Munich in April. On market conditions, volatility in many underlyings (commodities, stocks, rates and currencies) dropped to a record low in the last month, as central banks pumped worldwide liquidity into the system to avoid deflationary economics. On banking regulation, the Governor of ESMA and EBA jointly announce significant improvements to the Euribor benchmark fixing process, through their joint review: http://www.eba.europa. eu/documents/10180/534414/2014207+ESMA-EBA+Review+of+Euribor+Rec ommendations.pdf. Judge by yourself. On covered bonds, a proposed draft regulatory standard (RTS) was published by EMSA, EBA and EIOPA in April. It would allow an exemption for covered bond programmes won't need to post collateral for their swap operations to hedge interest rate and currency risks, in a oneway CSA, which means they would still receive it when the trade is in-the-money for the vehicle. The draft if open to consultation and comments up until July 14th at: http://www.eba.europa.eu/-/ eba-esma-and-eiopa-consult-on-draft- - JUL N°86 On foreign banks lending against metals, China commodity financing is recently falling following a probe that emerged on inventories of copper and aluminium used multiple times to be pledged as collateral for financing. This relates mainly to Qingdao port. Collateralisation will be certainly an important subject from now on. the US Fed, Daniel Tarullo, commented that there is still a long way to go to align risk-taking incentives of employees in the financial industry with the regulatory objectives of safety and soundness. The crisis seems to be behind us but little has changed in terms of attitude. Maybe we should try more managerial and less compliance risk management...the repetition says it all. - On ECB rates and bank reactions, bank will have to start paying 0.1 percent on any amounts deposited at ECB that exceed the minimum reserve requirements and a liquidity facility of €400 billion tied to bank lending will be available. We have reached a situation comparable to Japan's anti-deflationary policy activated in the 90s. Commerzbank's CEO, Martin Blessin, already announced that they would stop depositing cash surpluses at ECB. Anti-deflationary policies, their long timespan and the case of Japan are well presented here, in an NBER paper (digest and link to the full paper): http://www. nber.org/digest/jun05/w10938.html. of the last years. Read the report of the Bank of England on securitisation for a similar "comeback": http://www.bankofengland.co.uk/publications/Pages/ news/2014/082.aspx. LE MAGAZINE DU TRESORIER / TREASURER MAGAZINE Did you know... / AUG / SEP 2014 No philosophical litany this time. As a risk observatory, this edition focuses on listing some of the many news and updates around us in the financial world that we deem wise to be acquainted with. We still take advantage of some of them to highlight the debate behind the scene. 65

Table des matières de la publication Trésorier/Treasurer magazine - N°86 - Jul/Aug/Sep 2014

Couverture
SOMMAIRE
EDITORIAL
FINANCIAL HIGHLIGHTS Luxembourg Tax News
INTERVIEW David Holland
FOCUS
FORUM
CORPORATE FINANCE
15 MINUTES WITH INTIX
THE FINANCIAL RISK OBSERVATORY
NEWS

Trésorier/Treasurer magazine - N°86 - Jul/Aug/Sep 2014