{"id":13987,"date":"2010-10-14T10:37:17","date_gmt":"2010-10-14T14:37:17","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=13987"},"modified":"2010-10-14T10:37:17","modified_gmt":"2010-10-14T14:37:17","slug":"stock-markets-move-up-despite-increased-regulation","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2010\/10\/14\/stock-markets-move-up-despite-increased-regulation\/","title":{"rendered":"Stock Markets Move Up Despite Increased Regulation"},"content":{"rendered":"

By Thomas Bainbridge <\/strong>– Markets across the globe are on the up, which is somewhat surprising considering that the talks surrounding Basle III have managed to potentially deliver a memorandum for disaster.<\/p>\n

Generals have a tendency to fight the last war and both the central banks and finance ministers seem to be as blinkered as the WWI commanders in their conviction that ‘one big push’ will win the war. In their desperate attempts to avoid a repeat of 2008\/2009, law makers risk creating an even poorer situation.<\/p>\n

Unfortunately for the indebted nations of the West, we need the banks to be as imaginative as possible in order to get lending going again, however this appears to be the last thing on their agenda.<\/p>\n

Senior management of financial institutions are committing a massive amount of their time on regulatory issues and capital is now being stretched even further. Can you imagine any other sector utilising such a scarce resource so unproductively without complaint?<\/p>\n

As Simon Denham of Capital Spreads<\/a> recently remarket, “Apologies, but increasing cash requirements for almost all risks, then forcing an increase in required capital levels by relation to a different criteria (share capital) is not going to lead to increased lending.<\/p>\n

“However banks will probably be relieved that our Lords and Masters did not come out with something worse than Basle III”.<\/p>\n

The damaging effect of what is going on may have started to show through in the UK’s trade figures. They had a gloomy look about them: 1) they were terrible, 2) the visible deficit was \u00a31 billion larger than was expected and 3) the invisible surplus was \u00a3500 million worse than anticipated.<\/p>\n

Is this an indication that, with tax rates so hugely out of line with those elsewhere in the world and overheads now far higher in the UK than in comparably more stable parts of the globe, that financial business is starting to leave these isles?<\/p>\n

If London loses its European superiority, the consequences for the UK could be grim. However Basle III is just the start. When will the regulators learn that letting politicians anywhere near financial regulation is just a disaster waiting to happen?<\/p>\n

The concept that bans on short selling (in spread betting, CFDs<\/a> etc) or central reporting of positions are in any way stabilising decisions is simply whimsical. The majority of UK companies already report every single equity trade to the regulators. The fact is that the regulators are swamped by data. Multiply this by every state in the European Union and you have a considerable problem.<\/p>\n

Banks spend tens of millions on computer systems to process the data that they, alone, create. Can you imagine the processing programme that would be necessary to take every single derivative trade from every financial institution in the European Union? And then it has to be processed.<\/p>\n

For all the forecasts of fiscal catastrophe it might be sensible to bear in mind that Britain and America will actually make money from their investments in the financial sector.<\/p>\n

The permitted demise of the Lehman Brothers, whether incautiously engineered or not, was the real failure as it exposed every financial institution to the possibility of contagion.<\/p>\n

In the UK, the failure of Northern Rock also appears odd in hindsight. It could be argued that it was not the financial institutions that should be placed with the blame for the events of 2008\/2009, but the ‘lenders of last resort’ ie it was the central banks that reacted too late to events.<\/p>\n

About the Author<\/h3>\n

A leading financial author based in the heart of London’s Canary Wharf. Thomas Bainbridge is a respected commentator on the financial markets including the Financial Spreads<\/a> markets.<\/p>\n","protected":false},"excerpt":{"rendered":"

Markets across the globe are on the up, which is somewhat surprising considering that the talks surrounding Basle III have managed to potentially deliver a memorandum for disaster.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-13987","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/13987","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=13987"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/13987\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=13987"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=13987"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=13987"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}