Thursday, October 15, 2009

Trading book quantitative impact study by the Basel Committee: results

Trading book quantitative impact study by the Basel Committee: results
BIS, October 15, 2009

The Basel Committee on Banking Supervision issued today the results of its recent trading book quantitative impact study, which assesses the impact of the revisions to the 1996 rules governing trading book capital. These revisions, which were originally published by the Committee in January 2009, were subsequently adopted in July 2009.

Excluding the so-called correlation trading portfolio, the study concludes that the changes to the market risk framework will increase average trading book capital requirements by two to three times their current levels, although the Committee noted significant dispersion around this average. Based on the results of the study, the Committee decided to maintain the original calibration as proposed in its January consultative package and as adopted in July 2009.

Mr Nout Wellink, Chairman of the Basel Committee and President of the Netherlands Bank, noted that "increasingly complex trading book exposures were a major driver of losses in the recent crisis". He added: "The reforms will ensure that these exposures are backed by a sufficient capital cushion, help address procyclicality of trading book capital requirements, and limit arbitrage opportunities between the trading book and the banking book."

The Committee will conduct a further impact study, which will evaluate a floor for the comprehensive risk capital charge for correlation trading portfolios. This impact study will be completed in 2010. The trading book requirements will be implemented no later than 31 December 2010.

Technical background

The Committee's new trading book rules set a multiplier of three for both the current and stressed value-at-risk measures as well as a three-month floor on the liquidity horizon used in incremental and comprehensive risk capital requirements. The incremental risk measure includes default risk as well as migration risk for unsecuritised credit products held in the trading book. The comprehensive risk measure can be applied to banks' correlation trading portfolios and captures not just incremental default and migration risks, but all price risks.

Full study:

US Support for the Arms Trade Treaty

Arms Control and International Security: U.S. Support for the Arms Trade Treaty. By Hillary Rodham Clinton, Secretary of State
Washington, DC, October 14, 2009

Conventional arms transfers are a crucial national security concern for the United States, and we have always supported effective action to control the international transfer of arms.

The United States is prepared to work hard for a strong international standard in this area by seizing the opportunity presented by the Conference on the Arms Trade Treaty at the United Nations. As long as that Conference operates under the rule of consensus decision-making needed to ensure that all countries can be held to standards that will actually improve the global situation by denying arms to those who would abuse them, the United States will actively support the negotiations. Consensus is needed to ensure the widest possible support for the Treaty and to avoid loopholes in the Treaty that can be exploited by those wishing to export arms irresponsibly.

On a national basis, the United States has in place an extensive and rigorous system of controls that most agree is the “gold standard” of export controls for arms transfers. On a bilateral basis, the United States regularly engages other states to raise their standards and to prohibit the transfer or transshipment of capabilities to rogue states, terrorist groups, and groups seeking to unsettle regions. Multilaterally, we have consistently supported high international standards, and the Arms Trade Treaty initiative presents us with the opportunity to promote the same high standards for the entire international community that the United States and other responsible arms exporters already have in place to ensure that weaponry is transferred for legitimate purposes.

The United States is committed to actively pursuing a strong and robust treaty that contains the highest possible, legally binding standards for the international transfer of conventional weapons. We look forward to this negotiation as the continuation of the process that began in the UN with the 2008 UN Group of Governmental Experts on the ATT and continued with the 2009 UN Open-Ended Working Group on ATT.

PRN: 2009/1022

Robert Reich, 2007: if you're very old, [i]t's too expensive, so we're going to let you die

Robert Reich, 2007: if you're very old, [i]t's too expensive, so we're going to let you die
WSJ, Oct 15, 2009

Robert Reich, who served as President Clinton's labor secretary, delivered on the subject in 2007:

I will actually give you a speech made up entirely--almost at the spur of the moment, of what a candidate for president would say if that candidate did not care about becoming president. In other words, this is what the truth is, and a candidate will never say, but what candidates should say if we were in a kind of democracy where citizens were honored in terms of their practice of citizenship, and they were educated in terms of what the issues were, and they could separate myth from reality in terms of what candidates would tell them:

"Thank you so much for coming this afternoon. I'm so glad to see you, and I would like to be president. Let me tell you a few things on health care. Look, we have the only health-care system in the world that is designed to avoid sick people. [laughter] That's true, and what I'm going to do is I am going to try to reorganize it to be more amenable to treating sick people. But that means you--particularly you young people, particularly you young, healthy people--you're going to have to pay more. [applause] Thank you.

"And by the way, we are going to have to--if you're very old, we're not going to give you all that technology and all those drugs for the last couple of years of your life to keep you maybe going for another couple of months. It's too expensive, so we're going to let you die. [applause]

"Also, I'm going to use the bargaining leverage of the federal government in terms of Medicare, Medicaid--we already have a lot of bargaining leverage--to force drug companies and insurance companies and medical suppliers to reduce their costs. But that means less innovation, and that means less new products and less new drugs on the market, which means you are probably not going to live that much longer than your parents. [applause] Thank you."