All Articles Finance This Week in Basel - February 19

This Week in Basel – February 19

IAIS names new Secretary General, Trouble for FSI Chairman Restoy, Yellen on global regulatory collaboration

4 min read


Financial Stability Institute Chairman Fernando Restoy

Informativo Jurídico

A weekly roundup of news and information eminating from and related to the Bank for International Settlements (BIS) in Basel, Switzerland.

IAIS announces new Secretary General

The International Association of Insurance Supervisors has tapped Jonathan Dixon to take the helm of the organization. Dixon, who hails from South Africa and is currently the deputy executive director of the country’s Financial Services Board, has been a member of the IAIS Executive Committee since 2009 and chair of the Implementation Committee since 2012.

Yellen barks back

Federal Reserve Chair Janet Yellen used her semi-annual monetary policy report to the US Congress as a platform to swat down a proposal from US Rep. Patrick, McHenry, R-N.C., that called for the Fed to step back from international coordination on policy until the Trump administration developed its positions on issues like global financial regulatory reform. McHenry raised the issue yet again during Yellen’s appearance on Capitol Hill, drawing a pedantic response from the Fed chair. “Congressman, you know that nothing is a rule that is effective in the US until regulatory agencies have gone through a normal rulemaking process,” Yellen explained, “and nothing in these international discussions binds the US regulatory agencies – including the Fed – to carry out agreements in our own rulemakings in the US.” During her testimony

McHenry preps for the revolving door

The choice by Rep. McHenry to take a shot at Yellen is a curious one. McHenry’s unremarkable career in Congress includes getting into hot water for mocking an American who was serving his country over in Iraq and then posting a video from that same trip to Iraq that military officials asked McHenry to take down out of concern that it might jeopardize the operational security of coalition forces. But McHenry’s naivete in Iraq doesn’t mean he has shied away from posting videos. If you want to see his comedically uninformed quesitoning of Yellen, he has – of course – posted the video on his website. McHenry is a member of the House Financial Services Committee. Most representatives join the Financial Services Committee for one of two reasons: They have real-world banking experience and want to apply that experience to banking policy or they have no real-world banking experience, but they want to make loads of money lobbying for banks when their time in Congress comes to an end. Well, McHenry has no real-world banking experience, so…

No bueno

The Bankia debacle in Spain looks like it is going to ensnare a high-ranking official at the BIS. A court in Spain has announced that Financial Stability Institute Chairman Fernando Restoy is one of 8 individuals under investigation for their conduct related to Bankia, the bank that was floated on the CNMV stock market just a year before needing a massive government bailout. The High Court said evidence, including emails, suggests “criminality” on the part of the individuals ahead of the floating of Bankia. So … the head of an entity whose very name indicates it is focused on financial stability is now the subject of a criminal investigation into his conduct related to the collapse of a bank. Ouch!

The inconsistent spillover effects of unconventional monetary policies

Qianying Chen of the IMF, Alex Ross of the University of Cambridge and Marco Lombardi and Feng Zhu, both of the BIS, studied the impact crisis-era unconventional monetary policy by the US Federal Reserve and the European Central Bank had on 24 major advanced and emerging economies. Their findings? Not surprisingly, they found Federal Reserve policies had a broader impact on economies around the world than ECB policies. They also found Fed policies had a stronger impact on European economies than ECB policies had on the US economy. And finally, they found individual economies’ ability to handle the spillover effects of unconventional policies from the Fed and the ECB was a mixed bag, based “partly on how each economy reacts to the US and euro area policy shocks, and partly on the distinct economic and financial structures, policy frameworks and exchange rate arrangements.”

TWIB Notes

  • Bank of Greece Governor Yannis Stournaras on proportionality in European banking regulation.
  • Alex Brazier, executive director for financial stability strategy and risk of the Bank of England, on the five principles of macroprudential policy.
  • And finally, last week I wrote about how one strategy the Trump administration could deploy regarding coodination with global bodies like the Basel Committee and the Financial Stability Board would be to agree to whatever standards are on the table and then make no effort to implement or enforce said standards. Well, this is Step One in the whole “don’t bother to enforce any financial regulations” approach.