STOCK MARKET WATCH -- Wednesday, 5 March 2014

[Demeter]

8. BOE Seeks Derivatives Pact to Prevent a Repeat of Lehman Cascade

CAN SOMEONE LEND ME AN A IRONY METER? MINE JUST BROKE...

http://www.bloomberg.com/news/2014-03-04/boe-seeks-derivatives-pact-to-prevent-a-repeat-of-lehman-cascade.html

The Bank of England is seeking a global pact among banks to suspend default clauses in some derivatives contracts during a crisis, in a bid to ward off bank death spirals that cascade through the financial system.

The U.K. central bank wants lenders and the International Swaps and Derivatives Association Inc., an industry group, to agree to temporarily halt claims on banks that become insolvent and need intervention, Andrew Gracie, executive director of the BOE’s special resolution unit, said in an interview.

“The entry of a bank into resolution should not in itself be an event of default which allows counterparties to start accelerating contracts and triggering cross-defaults,” Gracie said. “You would get what you saw in Lehmans -- huge amounts of uncertainty and an uncontrolled cascade of closeouts and cross defaults in the market.”

Regulators and central banks around the world have grappled with banking reforms aimed at keeping public money safe during a financial crisis, since the fall of Lehman Brothers Holdings Inc. in 2008 prompted governments to prop up failing lenders to prevent economic disaster. The Financial Stability Board, which brings together regulators and central bankers from the Group of 20 nations, has ranked banks and insurers by their potential to cause a global meltdown and demanded bigger financial cushions to avert a repeat of the 2008 credit freeze. The G20 has also drawn up guidelines aimed at harmonizing the powers available to regulators to wind down a crisis-hit bank.


I SUPPOSE BANNING DERIVATIVES CONTRACTS IS NOT ON...