Saturday, January 29, 2011

If Bankers Really Are Thankful, They Will Voluntarily Provide Current Asset-Level Data

"An awful lot has changed in the last three years and we should say 'thank you' to the central banks, to the finance ministers, to the regulators because banks are operating in a safer and sounder financial system." - Barclays' CEO Bob Diamond

The chief executives of banks met at Davos to discuss what has changed regarding regulation, the sovereign crisis and political intervention in the markets.  According to a Bloomberg report,

... [Bob] Diamond presented an “industry issue matrix” for discussion among the participants.... The list of issues was visible through a window into the meeting room.

The matrix contained five items for discussion: Interplay and unintended consequences of proposals to regulate institutions; threats of sovereign debt default, fiscal weaknesses and contagion in the euro zone; reactions to policymakers’ increasing propensity to intervene in markets; financial innovation and appropriate institutional structures; and successful business in a low-yield environment.

Their solution to addressing these issues could be summarized as:
"I think we should be aware of keeping market forces intact because they are very important -- that is where supply and demand come together," Josef Ackermann, the chief executive of Deutsche Bank, told Reuters.
"We have to be very careful. Sometimes market movements tend to have excesses but you cannot regulate the excesses because then you are destroying the markets.
"Sometimes markets have an overreaction and some sort of excesses and that requires the discipline of the market participants. But I think we should in all cases keep the markets intact," he said.
The chief executives know that the only way to bring about effective global market discipline is for financial institutions, including hedge funds, to provide market participants with current asset-level data on an observable event basis.

The chief executives know that eliminating opacity will do more to stabilize and restore trust in the financial markets and help to restore growth in the global economy than any amount of policymaker intervention.

The chief executives know that it is their best interest to have markets that function rather than ineffective regulations with their related unintended consequences. Unlike existing regulations, providing borrower privacy protected current asset-level data on an observable event basis can be implemented in an identical manner globally.

The chief executives know that voluntarily providing current asset-level data is the best way to thank governments, regulators and most importantly the taxpayers for all of the assistance they have provided since the beginning of the credit crisis.

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