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ACA Summit Salzburg Global Seminar

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ACA Summit Salzburg Global Seminar New Rules for Global Finance Nicholas W. Conger (WVWC) & Nora Myers (UCWV) October 15, 2011 Ashville, North Carolina – PowerPoint PPT presentation

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Title: ACA Summit Salzburg Global Seminar


1
ACA Summit Salzburg Global Seminar New Rules
for Global Finance
  • Nicholas W. Conger (WVWC) Nora Myers (UCWV)
  • October 15, 2011
  • Ashville, North Carolina

2
ACA Member Institutions
  • WVWC
  • UCWV

3
Salzburg Global Seminar
  • Appalachian College Association (ACA)
  • Mellon Foundation Fellowship

4
Austria
5
Austria
6
Austrian Alps The Sound of Music
7
Grand Tetons National Park Wyoming
8
Salzburg Global Seminar
9
Schloss Library
10
Schloss Dining Room
11
Weiner Schnitzel
12
Apple Strudelbut
13
Salzburg Global Seminar
  • Vienna, Austria
  • -
  • 1st Time in Vienna

14
Belvedere Palace Prince Eugene
15
City Hall
16
Schonbrunn Palace - Hapsburg
17
St. Stephens Cathedral
18
Vienna Opera House
19
Vienna Opera House
20
University of Vienna Universität Wien
21
Vienna National Library
22
Bratwurst Sauer Kraut
23
Café Sacher Sacher Tort
24
Viennese Coffee
25
Hotel Tram to VNB
  • Tram
  • Hotel

26
Austrian National Bank Oestereichische National
Bank (ONB)
27
Federal Reserve Board (FED)
28
Government Sponsored Enterprises (GSEs)
29
Salzburg Global Seminar
30
Conservatorship of GSEs - September 7, 2008
31
  • 2008 Global Financial Crisis
  • Review of the Carnage

32
2008 Global Financial Crisis
  • http//www.cfr.org/world/crisis-guide-global-econo
    my/p19710

33
New Rules for Global Finance
  • 2008 Global Financial Crisis
  • The Worst Crisis Since 1929
  • Commercial Bank Failures in Ireland, UK, Iceland
  • Hedge Fund Failures
  • Investment Bank Failures or Near Failure
  • Two GSEs placed into Conservatorship
  • Global Insurance Company CDS
  • Massive U.S. Central Bank U.S. Treasury
    Infusion of Capital

34
New Rules for Global Finance
  • Architect's of the Multi-Trillion Fiscal
    Bailout
  • Hank Paulson U.S. Treasury Sec
  • Tim Geitner NY Fed President
  • Ben Bernanke FED Chairman
  • White House Presidents Bush Obama
  • Congress Chris Dodd-Barney Frank

35
Troubled Global Financial Institutions
  • Northern Rock
  • Bear Stearns
  • Lehman Brothers
  • Merrill Lynch
  • Bank of America
  • Fannie Mae and Freddie Mac
  • Citibank
  • AIG

36
Salzburg Global Seminar
  • Salzburg Global Seminar
  • New Rules for Global Finance Proposals for
    Regulatory Reform Topics
  • Capital Adequacy
  • Regulatory Structure Reforms
  • Oversight of Derivatives
  • Risk Management
  • Systemic Risk
  • Europe Asia - USA

37
Ewald Nowotny Governor, ONB
38
Salzburg Global Seminar
  • Financial Stability
  • The Role of the EU the UK FSB FSA
  • European Union (EU) Stimulus Plan
  • UK
  • Financial Stability Board (FSB) and
  • FSA (Financial Services Authority)
  • Starting with the EU

39
The European Union
  • 27 Member Nations
  • European Council
  • European Commission
  • European Central Bank
  • Maastricht Treaty - 1993

40
The Euro - The Common Currency of 17 of the 27
member countries of the European Union
  • The Euro
  • 1 Coin

41
The European Central Bank
  • HQ Frankfort, Germany -- President
    Jean-Claude Trichet

42
EU Stimulus Plan
  • November 2008
  • 200 Billion 300 Billion
  • Macro Economic Plan to Limit the Economic
    Slowdown
  • S-T Stimulus to increase Demand and maintain
    employment
  • L-T investment in strategic sectors (Research
    Innovation)

43
UK Bank Rescue Package
  • October 2008
  • 500 Billion 850 Billion
  • Restore Market Confidence and Stabilize Banks
  • S-T Loans Guarantees
  • Direct Investment in Bank Capital
  • Anglo Irish Bank Corp Act 2009

44
Salzburg Global Seminar
  • European Financial Regulatory Reform and Impact
    on Banks
  • UK Centre for Regulatory Strategy
  • Need for Coordinated Regulatory Framework Reforms
  • London School of Economics Capital Adequacy
    (Charles Goodhart Basel II was a miserable
    failure)
  • Austrian Financial Market Authority
  • Euro Zone Problems are Country Concerns
  • We are moving in the right direction

45
Salzburg Global Seminar
  • Asian Financial Stability and Reform
  • Asian Development Bank-Manila
  • (President Kuroda)
  • Financial Institutions Stability
  • Deputy Governor Vanikkul, Bangkok, Thailand
  • China Banking Regulatory Commission
  • Fan Wenzhong
  • My SGS A-Ha - OMG Moment

46
Financial Stability Reforms - Asia
  • Asian Development Bank President Kuroda
  • Global Challenge is Economic Growth Economic
    Reform Concurrently (Stimulus Restraint)
  • Implementation Challenge Within and Across All
    Regions of the World

47
Financial Stability Reforms Asia
  • Thailand
  • Financial Institutions Stability Governor
    Vanikkul
  • 1997 Currency Crisis (Baht) Lessons Learned
  • Traditional Conservative Banking Model 10
    Growth (ROE)
  • Not 25 (Western Target)

48
Financial Stability Reforms - Asia
  • China
  • China Banking Regulatory Commission
  • Fan Wenzhong
  • 1997 Currency Crisis (Baht) - Russia LTCM
  • NPL _at_ 25
  • China Hired Banking Experts
  • New Business Model Risk Management

49
China Banking Regulatory Commission (CBRC)
  • Basel III - Already Implemented
  • Staggered Implementation (2019) (12 Average)
  • Regulatory Agencies Centralized
  • New Risk Management Metrics
  • Risk Adjusted-ROE
  • NPLs now at 1-2 Capital _at_ 12
  • PLL gt 200

50
Salzburg Global Seminar
  • U.S. Financial Regulatory Reforms
  • Center for American Progress (David Min)
  • The Brookings Institution (Douglas Elliott)
  • History of US Banking System Glass Steagall
  • Regulatory Structure Fractured Needs Harmonized
  • Large Banks Getting More Concentrated Risk
  • Lesson Learned Due Diligence for PLS

51
Salzburg Global Seminar
  • US Financial Regulatory Response
  • Initial Stimulus Packages (TARP) 700 Billion
  • Multiple Follow-On FED Programs
  • Asset-Backed Commercial Paper
  • CP Funding Facility
  • GSE Debt MBS Purchases
  • Money Market Investor Funding Facility
  • Term ABS Loan Facility
  • US Govt Bond Purchases
  • Over 3 Trillionand still counting

52
U.S. Regulatory Reform
  • US Financial Regulatory Reforms
  • Financial Crisis Inquiry Commission (2009)
  • Financial Crisis Inquiry Report (2011)
  • Dodd-Frank Bill (July 21,2010)
  • Scope to examine the causes of the crisis .
    Membership 6-D 4-R. No Policy Recommendations
    and no specific violations cited.

53
U.S. Regulatory Reform
  • Dodd-Frank Bill Objectives
  • An Act (1) to promote the financial stability of
    the United States by improving accountability and
    transparency in the financial system (2) to end
    "too big to fail", (3) to protect the American
    taxpayer by ending bailouts, (4) to protect
    consumers from abusive financial services
    practices, and for other purposes.
  • Senator Christopher Dodd (D-Conn)
    Representative Barney Frank (D-Mass)

54
U.S. Regulatory Reform
  • Dodd-Frank Bill Accomplishments
  • Key areas left unaddressed
  • Derivatives
  • Credit Rating Agency Reform
  • Hedge Fund Accounting and Oversight
  • Unlike European System of Legislative Streams
  • Weaknesses
  • Too Political
  • Too Fragmented
  • Too Broad
  • Tries to do too much

55
Soare the various global regulatory reform
measures good enough to prevent a future crisis?
56
Salzburg Global Seminar
  • NO
  • The proposals are better than we had before, but
    they do not go far enough

57
Salzburg Global Seminar
  • Other Issues Proposals
  • Strengthen Corporate Governance
  • Regulation of Non-Banking Institutions
  • (Shadow Banking)
  • Global Convergence Coordination of Regulatory
    Reforms

58
Salzburg Global Seminar
  • Key Takeaways
  • Current Regulatory Proposals Do Not go Far Enough
  • (Basel III Bank Capital Adequacy - 2019)
  • Too Big to Fail Banks are even Bigger - US
  • Global Regulatory Structures Need To Be Reformed
  • Many Derivatives Markets remain Unregulated
  • Asian Banks have Learned Their Lesson Well

59
Salzburg Global Seminar
  • Discussion Questions
  • Where Do We Go From Here?
  • Critical Thinking Needed
  • Leadership and Hard Decisions Need to be Made
  • New Business Financial Models Needed
  • or maybe a return to the old fashioned ones?
  • Earn a Reasonable Return on your Investment

60
Micawber Principle
  • Closing Thought
  • Annual income twenty pounds. Annual
    expenditure 19 pounds, nineteen and six, result
    happiness.
  • Annual income twenty pounds. Annual expenditure
    twenty pounds, ought and six, result misery.
  • Source David Copperfield, by Charles Dickens
    (1850). Quote by Wilkins Micawber, modeled on
    Dickens father, John Dickens who was incarcerated
    in debtors prison after failing to meet his
    creditors demands.

61
Salzburg Global Seminar
  • Questions
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