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José Manuel González-Páramo: Globalisation, international financial integration and the financial crisis: The future of European and international financial market regulation and supervision
February 19, 2010--Speech by José Manuel González-Páramo, Member of the Executive Board of the ECB
Institute of International and European Affairs,
Dublin 19 February 2010
Introduction [1]
I would like to thank the Institute of International and European Affairs for organising this conference and for giving me the opportunity to speak in front of such a distinguished audience. I am particularly glad to be able to participate in the Institute’s series of speeches dedicated to the theme of “Fixing finance”.
Following the nature and objective of the series, I will dedicate part of my address to the issue of the future framework for European and international financial market supervision and, in particular, to the role of the ECB in macroprudential supervision in the European Union, but first let me briefly discuss the relationship between international financial integration and the financial crisis.
International financial integration and the financial crisis
Over the past decade or so, financial crises seem to have become more frequent and perhaps more disruptive than in the past. They also seem to propagate more rapidly. This experience has spurred intense interest among academics and policy-makers in understanding the link between financial integration and crises, and in better assessing the merits of financial integration in general.
The debate on the benefits of international financial integration is certainly not uncontroversial:
One extreme opinion sustains that integrated financial systems improve the allocation of productive resources, foster entrepreneurship and innovation, enhance market discipline, and help countries to insure against macroeconomic fluctuations.
At the other extreme, it is argued that the free flow of capital widens the wealth gap between rich and poor countries and exposes domestic financial systems to the risk of instability. [2]
Britain's Debt Set to Be Higher Than That of Greece
February 19, 2010--Britain's public finances may end this year in a worse state than those of Greece, economists warned yesterday, raising serious fears over the economic stability of the country.
In surprise news which sent the pound sliding, official figures showed that the Government borrowed £4.3 billion last month.
It was the first time since 1993 that the public finances had gone into the red in January – a month in which tax revenues usually push the Exchequer into the black.
DB Index Research -- Weekly ETF Reports - Europe
February 18, 2010--Highlights
ETF Volume
Exchange based Equity ETF turnover rose by 19.9% on the previous week. Daily turnover for the previous week was E1.7bn. European fixed income ETF turnover rose by 1.9% to E269.7m.
In exchange based bond ETFs, db x-trackers US Dollar Money Market ETF has the highest daily turnover of E30.95m. Among the Equity ETFs, iShares DAX (DE) has the highest daily turnover of E85.99m.
There was one new listing last week. Osmosis Fund plc issued one new ETF on London Stock Exchange.
Style ETFs rose to the top position as leading product area with total turnover of E488m with 29.20% of total ETF turnover followed by European Regional ETFs with total turnover of E482m accounting for 28.87% of total ETF turnover. The DAX ETFs remain the dominant country products with total average daily volume of E193m across the fourteen listed products and accounting for 11.6% of all equity ETF volume.
DJ Euro STOXX 50 ETFs accounted for 15.6% of turnover trading E261m per day with liquidity split across 17 ETFs and 44 different listings on 9 exchanges.
Market Share
The Deutsche Borse XTF platform has the largest market share with 37.1% of total turnover. The Euronext NextTrack platform has 19.0% market share. The LSE’s combined Italian Exchange and London market share is now 20.8%.
Assets under Management (AUM)
Total European Equity related AUM remained at about the same level at E110.7bn during last week. AUM for DJ Euro STOXX 50 ETFs was E20.8bn accounting for 18.8% of total European AUM. Fixed Income ETF AUM remained at about the same level at E36.6bn.
Overall, the largest ETF by AUM was Lyxor ETF DJ Euro STOXX 50, an Equity based ETF, with AUM of E5.0bn. The largest Fixed Income ETF by AUM was the iShares € Corporate Bond with AUM of E3.2bn.
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AKA calls for legal certainty in German provincial pensions
February 19, 2010--A key figure at the German association of local and church pension schemes (AKA) has claimed postponing funded pension schemes because of the financial crisis could be detrimental to trust in the pensions system. A number of German provinces have set up funded pensions systems over recent years.
But over recent months, the German province of Niedersachsen has halted plans to create a pension fund for civil servants while Bavarian officials have frozen payments to a similar vehicle. (See earlier IPE stories: Brandenburg starts to fund pension and Bavaria freezes contribution to public pension fund)
New Source ETF on DAX Tradable at Deutsche Börse
February 18, 2010--An additional exchange-traded equity index fund issued by Source is now tradable on Xetra.
ETF name: DAX Source ETF
Asset class: Equity index ETF
ISIN: DE000A0X80V0
Management fee: 0.15 percent
Distribution policy: non-distributing
Benchmark: DAX®
This new Source ETF gives investors a further opportunity to invest in the performance of the DAX index. DAX is the most important German equity index, and as the fourth largest underlying for derivatives in the world, is a key equity index in the global financial markets. The DAX index is calculated by Deutsche Börse and tracks the performance of the 30 largest German companies in terms of order book turnover and market capitalization.
The product offering in Deutsche Börse’s XTF segment currently contains a total of 556 exchange-listed index funds, making it the largest offering of all European stock exchanges. This selection, together with an average monthly trading volume of €11 billion, makes Xetra Europe’s leading trading venue for ETFs.
LSEG Completes turquoise transaction to create new pan-european venture - David Lester appointed CEO of Turquoise-Baikal combination
February 18, 2010--London Stock Exchange Group plc (LSEG) has completed its acquisition of Turquoise Trading Limited (Turquoise), paving the way for the creation of a new pan-European trading venture through a merger of the businesses of Turquoise and Baikal Global Limited (Baikal).
The new venture, which will continue to trade under the Turquoise name, aims to drive European trading volume growth and promote venue choice. It will benefit from synergies with LSEG infrastructure and the planned migration to MillenniumIT trading technology.
David Lester has been appointed CEO of Turquoise, in addition to his role as Director of Information Services for London Stock Exchange Group. Commenting on the completion, he said:
"I am really looking forward to working with the Turquoise and Baikal teams, and with clients, to build a successful pan-European trading business. Working in partnership with a number of major global banking firms, we have a tremendous opportunity to offer an attractive range of highly relevant and competitively priced products and services across Europe.
ISE introduces new departments and amendments to its regulations
February 18, 2010--The amendments to the “Regulation of the Istanbul Stock Exchange (ISE) Organization, Duties and Principles of Operation” and some revisions in the market regulations went into force after being published in the Official Gazette dated February 16, 2010.
• The “Marketing Department” was established. The Marketing Department will be responsible for determining the marketing strategy for the Istanbul Stock Exchange markets and the securities traded, or to be traded on such markets, and also for determining, developing, and applying the marketing methods in harmony with such strategies, and reporting the results of the above mentioned activities.
• The International Relations Department was re-structured and the functions of the relevant department will henceforth be carried out by the following two separate departments:
-The “International Relations Department” will be responsible for establishing, developing and maintaining links between the Istanbul Stock Exchange and its counterparts worldwide, as well as foreign capital markets institutions, international investors and other related persons/institutions; and within this framework, to carry out the necessary arrangements within and outside the Istanbul Stock Exchange, to coordinate the related activities and to realize all relevant correspondence and research.
-The “Media and Public Relations Department” will be responsible for the ISE’s media and public relations, organization, advertisement and sponsorship activities within the framework of promoting the institutional identity of the Istanbul Stock Exchange; all activities related to Right to Information Law; investor relations and consultancy services.
• The following amendments were made in the ISE regulations:
-The accounts to be used by the market makers and the principles of using such accounts were amended in the ISE “Stock Market Regulation” and “Emerging Companies Market Regulation”.
-As a result of the amendments, primary market operations were allowed in the ISE “Bonds and Bills Market Regulation”.
-The rules pertaining to the Istanbul Stock Exchange membership admission fee, membership collaterals, types of collaterals, and reimbursement of collaterals were re-arranged in the “Istanbul Stock Exchange Regulation”.
SocGen eyes 'bounce-back' in 2010
February 18, 2010--Société Générale reported a slim profit for the fourth quarter as it looks to “bounce back” from a year where its performance was badly marred by its exposure to risky assets.
France’s second-largest bank by market value said net income for the three months ended December 31 increased to €221m ($300m), up from €87m for the same period in 2008.
The meagre profit was slightly better than analysts’ expectations after SocGen rattled markets in January by issuing an unexpected profit warning, caused by a fresh €1.4bn hit on assets linked to the subprime mortgage market.
New capital rules seen to threaten Europe
February 18, 2010--Henri de Castries, Axa chief executive, warned regulators on Thursday that the level of prudence currently envisaged in the new capital rules for insurers being designed in Europe would threaten the continent’s long-term economic prospects.
Mr de Castries said that the principles behind the so-called Solvency II rules, which are meant to better match capital held with risks taken, were good but that supervisors would have to adjust their requirements to come back into line with the framework established by the European Parliament last year.
February 2010: Flash Consumer Confidence Indicator
February 18, 2010-In February 2010, the DG ECFIN flash estimate of the consumer confidence indicator for the euro area signals the first fall after 10 months of improvement (down to -17.4 from -15.8 in January). Confidence declined also among EU consumers, but to a lesser extent (down to -13.6 from -13.1 in January).
The next Business and Consumer Survey is due to be published on 25 February 2010.
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