The Corliss Group, If a finance company sector type meltdown

The Corliss Group, If a finance company sector type meltdown

Moves by the Serious Fraud Office (SFO) and other regulators to detect crime earlier through intelligence gathering and co-operation would see a finance company sector style meltdown acted on much earlier if it was to happen again, says the SFO’s acting CEO Simon McArley. In a Double Shot interview with McArley noted there had been plenty of rumours of problems within finance companies around before they started collapsing.


“If we’d applied an intelligence led approach at that point, and if that had worked across all the regulatory agencies, we may well have been able to intervene at a much earlier point,” McArley said. Asked how much earlier McArley noted that when he was working as a lawyer in 2001-02 there was already talk that all was not right with some finance companies.


“What we want to do is to be at that position, not necessarily conclusively drawing any conclusions, but being able to get together with our sector partners – the FMA (Financial Markets Authority) and other organisations and say ‘look we need to have a close look at this. We need to keep an eye on what’s happening’,” said McArley.


“I think we’re well placed to do that. Both the FMA and ourselves have invested quite heavily in that intelligence part of the equation, so we’re well on the way to it. But it’s something we can keep working on.”


Source:  The Corliss Group


The Corliss Group, Stocks Surge Past Economic Benefit on Tokyo Olympic Pick

The Corliss Group, Stocks Surge Past Economic Benefit on Tokyo Olympic Pick

Japanese shares seen as benefiting from the 2020 Olympics surged too far, too fast after Tokyo won hosting rights, with the rally outweighing the estimated economic impact, according to Shinkin Asset Management Co.

About 13 trillion yen ($131 billion) was added to the market capitalization of the Topix index last week after the city’s winning bid was announced, data compiled by Bloomberg show. One-third to half the gains were from investors trading on the Olympics news, Shinkin Asset said. The Tokyo Metropolitan Government projects the event will boost Japan’s economy by 2.96 trillion yen in the next seven years.

“People were surprised Tokyo got it after reports Madrid might win, so the reaction was big,” said Naoki Fujiwara, Tokyo-based chief fund manager at Shinkin Asset, which oversees about $6 billion. “Investors bought shares without thinking of how much impact the games would have on companies’ profits.”

The Topix climbed 3.7 percent in the two days after Tokyo’s selection. Shares had fallen on Sept. 6 after Spanish newspaper El Mundo said Madrid was set to win the hosting rights.

Gauges (TPX) tracking builders, developers, service industries, airlines, logistics stocks, steelmakers, machinery companies and cement producers listed on the Topix added a combined 4.9 trillion yen in market value last week, data compiled by Bloomberg show. That’s about 37 percent of the total increase.


Source: The Corliss Group, Stocks Surge Past Economic Benefit on Tokyo Olympic Pick

The Corliss Group Financial regulators warning House boom lifts pressure for ‘speed limits’ on loans


House boom lifts pressure for ‘speed limits’ on loans

FEARS of property bubbles have prompted a warning from one of the world’s pre-eminent financial regulators that using monetary policy to ward off dangerous dislocation in house prices is losing its clout, putting pressure on the Reserve Bank to consider “speed limits” on lending to cool the market.

As the weekend auction clearance rate in Sydney again topped 84 per cent, a study by the Switzerland-based Bank for International Settlements found central banks had increasingly used prudential rules to battle property market “booms and busts” instead of monetary policy.

This comes as the RBA’s record-low interest rates set up a potentially uncomfortable position for governor Glenn Stevens.

The RBA would not want to raise rates to soften property prices while the broader economy was weak and after the jobless rate last week hit a four-year high, analysts said.

In addition, higher rates would boost the Australian dollar, further straining the economy’s critical transition to non-mining sectors such as manufacturing, tourism and housing construction.


Led by a Sydney market that real estate agents say is “hot”, house prices are rising at an annualised rate of about 8 per cent as demand from investors floods tight supply.

In a bid to cool its booming property market, the Reserve Bank of New Zealand recently imposed macro prudential rules capping the lending banks can do at high loan-to-value ratios.

Canada, Sweden and Norway have also implemented LVR restrictions since the global financial crisis.

Economists say while the RBA has been opposed to macro prudential tools, the greater use of such rules by central banks globally may prompt a rethink if house price growth continues.

“Australian house valuations have recovered in the last 12 months, along with a rebound in consumer confidence metrics,” said John Buonaccorsi, a banking analyst at investment bank CIMB. “At the same time, business confidence remains weak, suggesting to us that low interest rates are still needed to support business investment. Against this background, NZ’s policies could prompt a rethink on using macro prudential tools in Australia.”

The BIS’s one-off study looked at policy actions on housing markets in 60 economies, including Australia, from January 1990 to June last year.

Monetary policy in terms of changes in rates is not included as it is already “well documented”, with the study focusing on three actions: reserve and liquidity requirements, and limits on credit growth. Five prudential measures were included.

While it found greater use of monetary policy actions overall, the share of prudential policy actions more than doubled to 33 per cent in the 2000s and 39 per cent from January 2010 to June 2012. In addition, the 13 economies in the Asia-Pacific region were the most active users of prudential measures.

“These findings are in line with the increasing interest of policymakers in prudential measures that specifically influence housing credit booms,” the report says.

“Since the 1990s, financial cycles such as housing credit and house price cycles have become longer, larger and less synchronised with business cycles and inflation cycles.”

The report concludes many central banks have adopted interest rate policy and inflation targeting as the main part of monetary policy framework since the 1990s. The RBA’s primary mandate is to set the cash rate to meet its inflation target of 2-3 per cent, but it is also charged with ensuring economic stability, in which housing markets play a big role.

BIS did not refer to Australia’s current property market, but the surge in prices has caught the eye of regulators. Last week, the Australian Prudential Regulation Authority warned banks not to relax home lending standards.