An agreement between the major banks in the world to secure financial system
An agreement between the major banks in the world to secure financial system
GMT 10:00 2014 Sunday, October 12th
Under the pressure of market regulatory authorities, agreed to major banks in the world on Saturday to ensure the safety of the global financial system by accepting to give up some rights in the transactions entered into by mutual consent.
The authority said the International Swaps and financial derivatives that 18 banking institution American, European and Asian countries are the largest in the world, you will modify the rules of the market, worth seven thousand billion dollars of derivative products, in order to avoid that result in the bankruptcy of one of them to the collapse of the global financial system.
And the International Swaps and Derivatives Exchange (Aasda) is the organization which represents the sector. They assume that the negotiations with the authorities of organizing markets.
And financial derivatives are “insurance contracts” on the shares, bonds and indices of the Stock Exchange or raw materials such as wheat, oil, and even copper is being negotiated directly by mutual consent, and the institutional investors (banks, investment funds, insurance companies and pension funds …) scalp around.
The first goal is to allow companies to protect themselves in the face of various forms of financial danger.
This unregulated market, demonstrated the strength of its influence in 2008, when the financial crisis accelerated. Has resulted in the bankruptcy of Lehman Brothers, the biggest broker in the derivatives market in September 2008 to the collapse of a large Per Mountgh derivative contracts related with the bank.
And it has sowed chaos in the financial markets.
Since then confirm the regulatory authorities in the world it is necessary to set a deadline, even if short-Lay busty Bank to be able to re-capitalized and avoid panic in the financial markets. The authorities will have this so some time before abandoning the banking institution for any buyer.
The Federal Reserve said that the American plan credible and well prepared to get out of the crisis for the bank faces difficulties can remove the feeling that will blow governments to help large institutions that could affect the bankruptcy on the global financial system as a whole.
The aim of this new agreement, which will enter into force on the first of January next to avoid putting such as occurred when the bankruptcy of Lehman Brothers.
The authority said the International Swaps and Derivatives Exchange (Aasda) that the big banks and approved, a precedent, to abandon the principle of automatic cancellation of contracts if a financial institution has faced difficulties.
Practically, in the event of any defect in the large financial institution poses a threat to the financial system, banks will determine the deadline to give more time to the organizers to find a solution that avoids bankruptcy sector “in chaos” and its consequences may be dire.
The aim of this solution to the suspension of the contractual cancel contracts automatically in order to reduce the devastating impact of the major banks.
And called for regulatory authorities around the world to amend the rules that govern derivatives contracts that escape control because it concluded by mutual consent (or OTC). Have collided so far refusing to banks. But the Fed American make this issue one of the points that must be taken into account in the solvency tests that put her banks.
In a joint statement, welcomed the American Federal Reserve (central bank) and the body of the federal deposit insurance (Federal Deposit Aenechuranc Corporation – AFP de ICI), two of the major American financial institutions to adjust the American banking sector, in agreement.
The head of the International Swaps Aomalia Scott said in a statement: “It is an important step made by the sector to address the problem of” the bankruptcy of major banks and “reduce the risk of major institutions.”
He said, “This agreement will allow to reduce the risk of bankruptcy chaotic.”
Said Dennis Kelleher Chairman Peter Markets Association, which seeks to better regulate financial markets, “There is no doubt that this amendment will change to a large extent the ability to stop the effect of the serial (domino effect) for the crisis.”
The banks will apply the Agreement is “Bank of America” and “Bank of Tokyo-Mitsubishi” and “Barclays and BNP Paribas” and “Credit Agricole” and “Credit Suisse” and “Citigroup” and “Deutsche Bank” and “Goldman Sachs” and “JP Morgan Chase” and “HSBC” and “Masoha Financial Group” and “Morgan Stanley” and “Nomura” and “Royal Bank of Scotland” and “Societe Generale” and the Union of Swiss Banks (or CBS) and “Sumitomo Matsui.”
elaph.com
