News Letters

Four official reports on the causes of prolonged market turmoil spread the blame widely, and point to more regulatory intervention

By Melvyn Westlake

Amid the diagnoses and postmortems of the worst financial crisis in more than a generation, the role of the regulators is increasingly coming under scrutiny. The first round of official preliminary studies and reports, issued in February and March, broadly conclude that responsibility for the failures behind the crisis is spread widely, and shared by debt originators, underwriters, credit rating agencies, investors and regulators

Tokyo is sliding as a global financial hub. An ambitious new plan that includes principles-based regulation aims to restore its position

By Melvyn Westlake

Japan’s rigid and bureaucratic approach to financial regulation looks set for a make-over as part of a wide-ranging, government-backed plan to revive Tokyo’s lagging competitiveness as a major financial and capital markets centre. Under the four-pillar plan announced by Japan’s regulator, the Financial Services Agency (FSA), in December and endorsed by the cabinet in early March, regulation should become more principles-based, transparent and predictable.
Describing the plan as an “urgent task for us,” FSA chief Takafumi Sato, says his agency is “fully committed to promptly implementing the various measures envisaged in the plan.” Some veteran Tokyo-watchers are sceptical about whether many measures will ever be put fully into effect, arguing that there has been a number of proposed reforms during the last two decades that failed to change anything very much.

Bringing bonds and derivatives into the clearing and settlement Code of Conduct is being explored. Pros and antis are lining up

By Oonagh Leighton

Plans to extend the bold EU experiment in self-regulation – the Code of Conduct for clearing and settlement – to new asset classes such as bonds and derivatives, look set to spark even greater controversy than when it was first introduced for cash equities 18 months ago. Preliminary consideration of the code’s extension comes amid increasing signs that its intended objective of increasing competition in post-trade services is having some success. So far, the aim has been to break down the anti-competitive structures that allow exchanges to control all the functions of trading, clearing and settling of cash equity transactions. A possible extension of the code to other asset classes has been given a new significance by the recent separate proposals of two derivative exchanges, the InterContinental Exchange, (ICE) an Atlanta-based energy market, and the London International Financial Futures and Options Exchange, (Liffe), owned by NYSE Euronext, to take control of their clearing operations. To many market users such moves by exchanges to control clearing services looks anti-competitive, and a step in the wrong direction.

Bank critics of fair value accounting say it makes the crisis worse. Advocates argue it gives necessary transparency

by David Keefe

Global banking regulators may develop further guidance for supervisors and auditors using fair-value reporting, the accounting concept that’s come in for criticism from some quarters as the current financial turmoil deepens