The Bank for International Settlements (BIS) annual report includes highly topical economic analysis, including Section III, which discusses the potential ramifications of extended periods of low interest rate policies.  In particular, the report notes that the resulting ’search for yield’ can result in distorted financial innovation, lack of real investment, and an unwarranted increase in asset prices/decline in risk premia.  (BIS)

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The House and Senate Banking Committee wrangling wrapped up early this morning after a 20-hour session, with full Congressional approval likely in the next week or two.  Commercial end users of interest rate and foreign exchange derivatives look to be largely unaffected by the bill, although some desks may be spun off from large banks and more clearing will take place between broker-dealers.   Bigger infrastructure for unwinding failing banks and insurers, requiring skin in the game for debt originators, and consumer protections from bank fees are also included. (Bloomberg)

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Banks have slowed or stopped lending to each other. Interbank lending at its lowest level since 1994. (Bloomberg)

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http://www.sifma.org/blastemails/comMUNIcations/comMUNIcations-050610.html

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