AI and Geoeconomics

Financial Stability Oversight Council - http://www.treasury.gov/fsoc (Reuters) - A U.S. government watchdog on Wednesday slammed a post-crisis regulatory council created to spot emerging financial market risks, saying the group operates with little transparency and does not have all the  tools  to do its job. In testimony to Congress, the Government Accountability Office (GAO) faulted the Financial Stability Oversight Council (FSOC) for failing to enact certain reforms that were recommended in a report issued two years ago. "FSOC still lacks a comprehensive, systematic approach to identify emerging threats to financial stability," said GAO staffer A. Nicole Clowers, in testimony before a U.S. House of Representatives financial services panel. "FSOC has taken steps to improve its communication with the public, but could do more to improve transparency and accountability," Clowers said, noting that the council still does not keep detailed transcripts of i...

Synthetic ETFs Last year, Bank of England analysts wrote: Synthetic ETFs exhibit more of the characteristics that might contribute to the build-up of systemic risk. They are more complex than physical ETFs, although the degree of complexity remains far below that of some structured credit products developed in the run-up to the crisis. The derivative transactions between ETFs and affiliated banks (or those that the bank itself might undertake to gain exposure to the index) result in the build-up of counterparty credit exposures between market participants. And synthetic structures might pose funding liquidity risk to banks acting as swap counterparties if there is a sudden withdrawal of investors from the ETF market. There’s an extremely good discussion of the risks of synthetic ETFs in  this paper by the Bank for International Settlements . But the short version is that all of the risks get bigger when you see a large pronounced move to withdraw funds ...

RaisePartner | RP Market Watch - Red alert on cross-sector correlations confirmed