The Federal Deposit Insurance Corp. said this week that in the first quarter of 2012, bank profits rose to their highest quarterly levels since the second quarter of 2007. Meantime, a panel of U.S. regulators voted to designate swaps clearing houses as systemically important, a step that would put them under heightened supervision.
Conversation Starter
ISDA Publishes Paper Examining Differences in Derivatives Reporting Between US GAAP and IFRS Accounting Standards
NEWS RELEASE
For Immediate Release
ISDA Publishes Paper Examining Differences in Derivatives Reporting Between US GAAP and IFRS Accounting Standards
NEW YORK, May 23, 2012 – The International Swaps and Derivatives Association, Inc. (ISDA) today announced the publication of a paper, “Netting and Offsetting: Reporting Derivatives Under US GAAP and Under IFRS.”
The paper examines how and why derivatives are treated differently under the International Financial Reporting Standards (IFRS) and US Generally Accepted Accounting Principles (US GAAP) and their impact on the new Basel III Leverage Ratio.
It notes that the terms of netting, offsetting and set-off are often used to express the same notion but they are very different concepts. A better understanding of the terminology and the way in which derivatives are traded, managed and settled provides an understanding of why US GAAP accounting standard setters have consistently agreed that derivatives be reported on a ‘net’ basis instead of on a ‘gross’ basis on the face of the balance sheet and why this differs from reporting derivatives under IFRS. Historically, the Europe-based International Accounting Standards Board (IASB) has permitted significantly less balance sheet offsetting than the US-based Financial Accounting Standards Board (FASB).
ISDA believes that net presentation, in accordance with US GAAP, provides the most faithful representation of an entity’s financial position, solvency, and exposure to credit and liquidity risk. Individual derivative transactions that are subject to enforceable master netting agreements should be eligible for netting in the balance sheet on the basis that such financial statement presentation is most faithfully representative of an entity’s resources and claims and provides the most useful information for investment decisions.
See the full paper here:
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Lead Stories
FDIC: Bank profits at highest level since 2007
MarketWatch
Bank profits rose in the first quarter of 2012, reaching their highest quarterly levels since the second quarter of 2007, according to the Federal Deposit Insurance Corp.’s quarterly banking report, released Thursday. However, total loan and lease balances on the books of banks declined by $56 billion in the quarter, a situation that FDIC Chairman Martin Gruenberg said was “disappointing” after the industry saw three quarters of growth last year.
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Regulators Designate Swaps Clearinghouses Systemic
Bloomberg
A panel of U.S. regulators voted to designate swaps clearinghouses as systemically important, a step that would put them under heightened supervision.
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European Economic Outlook Dims Amid Impasse
the New York Times
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Senate confirms 2 Federal Reserve board nominees
Harvard economics professor Jeremy Stein, a Democrat, was confirmed Thursday on a 70-24 vote.
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Dimon Adds Talent to New York Fed Board, Allstate’s Wilson Says
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JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon adds insight to the Federal Reserve Bank of New York board, said Tom Wilson, the Allstate Corp. CEO who previously was a director at the Chicago district bank.
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CFTC chief: Looking at JPMorgan, need global rules
Reuters via Yahoo! News
WASHINGTON (Reuters) – The head of the U.S. Commodity Futures Trading Commission confirmed on Monday that the regulator is investigating JPMorgan Chase & Co’s recent losses that may exceed $2 billion on trades tied to credit derivatives.
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TIPS Give Bernanke Green Light to Ease Amid Record Yields
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US faces 2013 recession after ‘fiscal cliff’: CBO
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The United States faces a likely recession next year if Congress fails to stop scheduled spending cuts and tax hikes in January, congressional budget analysts warned Tuesday.
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China can now buy U.S. debt directly from the government, in what is the Treasury Department’s first-ever direct relationship with a foreign government.
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El-Erian Says Greek Euro Exit Probably Inevitable: Tom Keene
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IMF Calls on UK to Do More to Boost Economy
Time Magazine
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IMF’s Lagarde, OECD Call For More Euro Debt Sharing
International Monetary Fund head Christine Lagarde Tuesday called on euro-zone governments to accept more common liability for each others debts, saying that the region urgently needs to take further steps to contain the crisis.
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Greek banks to get $23 billion from bailout fund
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Dodd-Frank is hard to understand, and that’s why it has so many enemies
Washington Post
While Mitt Romney was speaking at the U.S. Chamber of Commerce on Wednesday, chamber members from across the country descended on Capitol Hill to tell Congress to get the government off their backs. Mitch Stebal, for one, was prepared to give Sen. Dick Durbin’s office an earful about over regulation.
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Senate Testimony Of SEC Chair Schapiro Updates Dodd-Frank Derivatives Progress
Forbes
On May 21, 2012, Securities and Exchange Commission Chair Mary Schapiro testified before the U.S. Senate Committee on Banking, Housing, and Urban Affairs concerning SEC?s ongoing implementation of Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
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Bloomberg
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On Friday, South Korea-based Woori Bank, a unit of Woori Finance Holdings Co. Ltd., sued Merrill Lynch unit of Bank of America Corporation.
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Events
TradeTech Swaps & Derivatives
May 28-30, 2012
America Square Conference Centre London
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2012 Central Bank Forum
June 13-15, 2012, Chicago
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Bond China Congress
September 4-5, 2012, Shanghai, China
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Firms & Banks
JPMorgan Joins MF Global in Lobbying Wins That Backfire
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JPMorgan Shows Need to Curb Overseas Swaps, Gensler Says
Bloomberg
Derivatives losses of at least $2 billion at JPMorgan Chase & Co. (JPM) show the need for extending Dodd-Frank Act swap regulations to overseas trades, said Gary Gensler , chairman of the U.S. Commodity Futures Trading (RTSIX) Commission.
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Regulators
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Bloomberg
Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said the Fed probably can’t repair all the damage to U.S. employment from the credit crisis and fiscal policy could help to revive the job market.
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The presidents of the Federal Reserve’s regional banks received an average salary of $342,000 last year, with William C. Dudley at the New York Fed taking home the highest salary at $410,780.
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Global News
China plans brokerage reforms to create its own Goldman Sachs
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World Bank cuts China forecast, urges measured policy
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BEIJING (Reuters) – The World Bank cut its economic growth forecast for China this year to 8.2 percent on Wednesday.
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BoJ Leaves Monetary Policies Unchanged
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The Bank of Japan met during the 5/22 Asian session to discuss monetary policy. The market has been pricing in more stimulus even though Shirakawa had spoke again st it. The BoJ added 10 tillion yen to its asset purchase program last month to make it 40 trillion yen, but kept it there this month. The overnight lending rate was also left below 0.1%.
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German Central Bank: Greek Exit Would be Big, but ‘Manageable’
FOX Business
Germany’s Bundesbank said that the impact of Greece leaving the eurozone would be substantial but ‘manageable.’
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Power shortages widen Tanzania’s trade deficit
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Bank of Japan leaves policy unchanged; yen climbs
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HONG KONG (MarketWatch) — The Japanese yen rebounded midday Wednesday after the Bank of Japan decided not to add any additional easing measures at its policy meeting. The central bank left its benchmark interest rate unchanged in the current range of 0 to 0.1% by a unanimous vote, and also didn’t announce a further expansion to its asset purchase program.
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Vietnam inflation slows as economy cools
AFP via Yahoo! News
Vietnamese inflation has eased to a single-digit figure for the first time in a year, according to official data, in the latest sign of an economic slowdown in the communist state.
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Ghana extends IMF programme to December
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ACCRA (Reuters) – Ghana will extend its pact with the International Monetary Fund (IMF) to December after the current programme expires in coming weeks, Finance Minister Kwabena Duffuor said on Monday in a move intended to show willingness on fiscal discipline in an election year.
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Dutch MP moves to block approval of EU bailout fund
Reuters via Yahoo! News
AMSTERDAM (Reuters) – Dutch politician Geert Wilders, who aims to turn a September 12 election into a referendum on the euro and EU membership, filed a lawsuit on Tuesday aimed at postponing the Dutch parliament’s ratification of Europe’s permanent bailout fund until after the vote.
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Spain bails out Bankia, seeks plan for troubled regions
Reuters via Yahoo! Finance
Spain announced a 9-billion-euro bailout for troubled lender Bankia on Wednesday.
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Christine Nielsen
Managing Editor
John Lothian News
Email – christine.nielsen@johnlothian.com
MarketsWiki – http://jlne.ws/AzHiaYI
