Trésorier/Treasurer magazine - N°84 - Jan/Feb/Mar 2014 - (Page 77)

The Financial Risk Observatory by Hugues Pirotte (FinMetrics) 1. Too much harmonisation might not necessarily produce less fragile networks 2. E.g., the EU is financing two big research projects called FOC (Forecasting Financial Crisis, focpro- Some air of déjà vu... Avoiding rare but heavy disruptions is key when you play with systemic risk and the risk of propagation of problems. For the rest, me must be careful about keeping a free choice of liquidity vectors and the capacity to take alternative routes when obstacles appear. And finally, liquidity is not about amounts (only) but about circulation of those amounts. All of our real economy and our tax system are based on the velocity of those exchanges. And of course, it is the same velocity and interconnectivity that also creates systemic risk. There is "some" research on network theory today going on2. We can cite the following piece of work that was recently published in Nature: "Default Cascades in Complex Networks: Topology and Systemic Risk"3 . It is clearly shown for example that various characteristics combine in making a financial network more or less fragile. There is no single solution and each type of network has its own fragility points. More concretely, and trying to think in terms of economics rather than physics, whatever you impose at the micro level, is not necessarily producing the best outcome at the macro level. We can show that imposing rules without being aware of additional asymmetries they might create, can lead to more macro instability. / FEV / MAR 2014 In our last edition, we stressed the point of view that there is a growing need to make sure to be heard by politicians on how to examine and judge financial markets, not only through the eye of banking and trading, but in terms of the real economy they are impacting through these rules. Treasurers can be very good advocates for an efficient financial system, simply because Treasurers act as supporters of a real "Main Street" activity first, not a "Wall Street" activity. The objective of the Treasurer is not to make profits on financial markets but to be able to access the desired liquidity on time. Not for him, but for a firm that needs it. And the firm has all sorts of stakeholders. In that sense, Corporate Treasurers seek what economists vow to financial markets: to be the numeraire's exchange grid of the real economy. This should therefore allow Corporate Treasurers to be more vocal about the net implications of some changes, not because they are lobbied by bankers, but because they need to lobby for themselves. The new money market fund directive proposal (issued in September) is a good example. It starts back from the definition of shadow banking, which I personally always found quite peculiar. Some institutions were maybe "in the shadows" for some but not for the rest of the market. They are an integrative part of the system. To say that money market funds (MMF) are systemically important is a tautology. As vectors of important liquidity, and liquidity being the energy of the grid, they have their place. Now, being an important part of the system means that we might indeed be worried about what they can do and what they cannot do. But at the same time, it means that -1- we must be careful about how to make sure they can still perform efficiently, and - 2 - they must be able to obey to the same market rules than the others. We must also never forget that market participants are supposed to judge and make their own decisions. Corporate treasurers don't manage the money of remote depositors who have no control on the managers; it is their own. Therefore, there must be quite responsible themselves already in making their buy/sell decisions. Of course, the regulator can be very helpful to make sure that everybody plays on the same common playground. But we said "common playground", not "perfect harmonisation"1 . LE MAGAZINE DU TRESORIER / TREASURER MAGAZINE - N°84 - JAN Back to our role in the society... ject.eu) and CRISIS (Complexity Research Initiative for Systemic Instabilities, crisis-economics.eu) that are dealing with these issues. 3. www.nature.com/srep/2013/130926/srep02759/full/srep02759.html4. Source: World Economic Outlook Database, IMF Calculations 4. http://www.frbatlanta.org/news/conferen/09fmc/gorton.pdf 77 http://www.ject.eu http://www.crisis-economics.eu http://www.nature.com/srep/2013/130926/srep02759/full/srep02759.html4 http://www.frbatlanta.org/news/conferen/09fmc/gorton.pdf

Table des matières de la publication Trésorier/Treasurer magazine - N°84 - Jan/Feb/Mar 2014

Couverture
SOMMAIRE
EDITORIAL
FINANCIAL HIGHLIGHTS Luxembourg Tax News
INTERVIEW Martin Sadleder- Treamo Business Consulting
FOCUS
FORUM
CORPORATE FINANCE
15 MINUTES WITH CRX Markets
NEWS
THE FINANCIAL RISK OBSERVATORY

Trésorier/Treasurer magazine - N°84 - Jan/Feb/Mar 2014