Currencies

Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

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Property

Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

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Currencies

Euro suffers worst month against the pound since financial crisis

Political risks are still all the rage in the currency markets. The euro has suffered its worst slump against the pound since 2009 in November, as investors hone in on a series of looming battles between eurosceptic populists and establishment parties at the ballot box. The single currency has shed 4.5 per cent against sterling […]

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Banks

RBS falls 2% after failing BoE stress test

Royal Bank of Scotland shares have slipped 2 per cent in early trading this morning, after the state-controlled lender emerged as the biggest loser in the Bank of England’s latest round of annual stress tests. The lender has now given regulators a plan to bulk up its capital levels by cutting costs and selling assets, […]

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Currencies

China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

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Categorized | Insurance

Insurers warn on ‘too big to fail’ plans


Posted on July 31, 2012

Regulators’ plans to designate big global insurers as too big to fail could have unintended consequences that risk “destabilising the financial system”, an industry body has claimed.

In a sign that insurers are stepping up their lobbying against the proposals, the Geneva Association said they might prompt insurers to cut holdings of government bonds as well as bank debt and equity.

    The body urged regulators to change draft criteria used to determine whether they regard an insurer as posing a potential threat to the financial system and global economy.

    The International Association of Insurance Supervisors is targeting 48 international insurance groups for possible designation as systemically important, which could lead to higher capital requirements and limits on their business.

    Banking supervisors have already deemed 29 institutions systemically important after examining more than 70, imposing capital surcharges on them.

    The IAIS plans to consider five factors: size, global activity, interconnectedness, non-traditional activities and substitutability.

    The mooted process will give greatest consideration – up to half the total – to the amount of non-traditional business, such as derivatives trading and variable annuities, the insurers conduct.

    Still, the Geneva Association said on Tuesday: “The current inclusion of traditional insurance activities in ‘large exposures’ means that the considerable holdings of government bonds and bank-issued securities owned by insurers would be subject to this indicator.

    “In order to manage their systemic risk ranking, insurers may seek to adjust their holdings in these important assets, making it harder for banks and governments to re-finance.”

    The association, which calls itself a think tank, is wholly funded by the insurance industry.

    Insurers have long maintained that they are fundamentally less risky than banks, with entirely different business models. Their investment decisions are keenly watched given that they are among the world’s biggest institutional investors.

    In Europe alone, the sector’s total holdings come to about €7.4tn, according to the CEA, the industry body.

    Insurers hold two-thirds of their assets in fixed income securities, with corporate bonds accounting for 38 per cent and government debt 28 per cent, according to a study by Blackrock earlier this year.

    The move to determine whether institutions are too big to fail and impose additional regulations on them is part of an effort by the Group of 20 leading nations to prevent a repeat of the 2008 financial crisis.

    As well as the collapse of several banks, the crisis also resulted in the US government rescue of AIG, previously considered one of the world’s strongest insurers.

    The International Association of Insurance Supervisors has conducted a two-month consultation on its proposed methodology. The deadline for submissions was Tuesday. It declined to comment.