Opinions

Quite rightly, there are veritable storms in capital markets conferences and the press about what needs to be done to prepare for MiFID II, due to take effect in 4+ months. There seems to be little chance for a further stay of execution, but then, with remarkable irony, MiFID I hit securities trading in November 2007 as the Global Financial Crisis was deepening, leading to the most massive destruction of capital in decades, and so undermining large swathes of the world economy. Regulators cannot time such matters, and the preparation of reforms based on broad public consultations and multiple drafts takes years. Still, we are where we are: perhaps some sort of progressive implementation would be sensible. If the authorities are certain of the value of their objectives, then surely it would be worth demonstrating some flexibility.

This is the second in a series of articles on PMFIs.

In response to the Global Financial Crisis of 2007-2009, the G20 countries developed a series of public policy initiatives in order to reorder and de-risk the world’s financial system. As initially announced in the 2009 Pittsburgh Declaration by the heads of those 20 governments, a key element focused on solidifying market infrastructures, themselves a central focus of Thomas Murray’s work since the company’s founding in 1994.

Earlier this month, Euroclear UK & Ireland (EUI) issued a consultation to participants concerning their proposals to enhance the US dollar settlement arrangements in the CREST system, and make relevant changes to CREST documentation. Thomas Murray wholeheartedly supports these proposals.

This is the first in a series of four articles considering central bank payment systems self-assessments against the PFMIs.

Introduction and the Bank of England Example

In response to the financial crises of 2007-2009, at the behest of G20 governments, the Financial Stability Board and its constituent bodies developed broad global standards to shore up a system that had proven all too fragile – though it must be said that the public, regulated marketplaces did function throughout (except in isolated cases where for a few days their governments closed them for fear of collapsing prices). The same cannot be said of the freezing up of the far larger OTC and banks’ market operations in that period, which was the source of the economic and social damage inflicted.

US Congressman Patrick McHenry recently sent a letter to Federal Reserve Chair Janet Yellen criticising the Fed’s participation in setting global banking rules of conduct and asserting that standards are agreed in opaque settings. But standardisation lowers business costs in finance as in manufacturing – for American banks and investors as well as their international counterparts. A common set of rules for the global financial industry is just a matter of common sense, argues Thomas Murray.

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