Friday, December 19, 2014

BIS Reacts to Systemic IRT

This just out, 14 minutes ago, from the Committee. Perhaps an all too obvious response to the recent so called "cromnibus" passage.

The take here is that internal risk transfer "if not appropriately constrained, could provide banks with a mechanism to shift risk between the banking book and trading book so as to take advantage of lower capital requirements in one or the other, creating incentives for capital arbitrage."

Not that this matters very much, but if the dominant US based primary dealers have a capital advantage over certain other systemic banks, said advantage continues to accrue under dollar zone control.

Why this hardly matters is that there really is no such thing as "US geopolitical control" in the sense that the US government or the US population derives any benefit from this type of activity. Rather, very powerful dollar-leverage groups (who have no sovereign allegiance) grow more powerful ... and this is a continuing concern for the central bank of central banks.

I suppose that a certain realization that "the dollar" is no more "American" than any other currency, and that its use (or abuse) has no more or less impact than any other currency's impact on perceived US geopolitical initiatives (perhaps an oxymoron at this point) is the more important realization when considering any capital advantage the dollar may afford.

I suspect the supporting links here will make good weekend reading for those concerned about the impact, from the BIS perspective.

For myself, this ends my review of current events for the week. Unlike those who are obsessed with the accrual of wealth to the exclusion of all other interests, including family, holiday and tradition, I will rest for now - perhaps a bill as transformational as the Federal Reserve Act is in the wings already, to be passed by our public partners on Christmas Eve.

And if so, I will find out a day late and a dollar short - so be it. To be a "dollar short" these days is a forgone conclusion anyway (if you get my meaning).

From the Roacheforques to you and yours,
Happy Holidays!

2 comments:

  1. I love how they publish this document with the revision marks showing:

    https://www.bis.org/bcbs/publ/d305.pdf

    It shows how they were intending to use the words "hedges" and "hedging" instead of "internal risk transfers" and "IRT"... and "instantaneous shock" was changed to be "scaled expected shortfall".





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  2. The craft of propaganda takes many layers, no?
    :)

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