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conferences February 27, 2008

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I’m going to New York this week for the Fordham conference on Fifty Years of European Community Law. I’ll be talking about my paper on Consumers of Financial Services and Multi-level Regulation in the European Union. Unfortunately I’ll be missing the UM International and Comparative Law Review’s symposium on Immigration Law & Policy this Saturday. If only I could figure out how to be in two places at once!

more on gambling February 25, 2008

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Recent regulations under the UK’s Gambling Act 2005 have the effect that:

any place which is regulated by the gambling laws of Tasmania will be able to advertise their remote gambling services in the United Kingdom without committing an offence under the Act.

They do this by treating Tasmania as if it were an EEA (European Economic Area) state. Tasmania is very far from any of the actual EEA states.

manchester news February 25, 2008

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Via the Guardian:

The government is to offer multimillion pound regeneration packages to Manchester and Blackpool today to make up for the decision not to grant a supercasino licence to either city.
Ministers will soften the impact of Gordon Brown’s “big moral decision” with a series of measures, including a £10m boost for Manchester’s Sports City, the one-time planned site for the casino. They are also expected to announce that 4,000 jobs will be created by extending until 2014 the life of the urban regeneration company New East Manchester, which was due to close shortly.
A higher education initiative, including a campus boosting the number of students in the city, is also on the cards.
Ministerial sources hope the package will be sufficient to prevent the Labour-controlled Manchester city council seeking a judicial review of the decision not to go ahead with the supercasino in Beswick, one of its most rundown areas.

I’d rather have 4000 jobs than a supercasino myself.

good question in european parliament February 21, 2008

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I’m not sure why it took so long, but they are asking an important question in the EP:

EU mechanisms for blacklisting terrorists need to be revised, as they fail to guarantee respect for fundamental rights and lack democratic scrutiny, said a number of MEPs in the Civil Liberties Committee during a debate on Monday with Council of Europe’s rapporteur on the topic, Dick Marty. The blacklisting system, created in 2001, is used to impose restrictive measures against people or entities suspected of terrorism.

bank of england 1946, northern rock 2008 February 18, 2008

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In 1946, the Bank of England was nationalised by the Labour Government. In 2008, the Labour Government will nationalise Northern Rock (the draft Bill is here). The decision to nationalise Northern Rock is described as being about delivering value for money for the taxpayer, and as being a temporary measure. The Chancellor’s statement describes the decision as follows:

under public ownership the Government will secure the entire proceeds from the future sale of the business in return for bearing the risks in this period of market uncertainty.

Robert Peston argues that shouldering these risks will cost British taxpayers more than £3500 each.

The UK Shareholders Association (UKSA) promised to fight the move,stating:

It seems the only reason that the Government has chosen nationalisation is because “it offers better value to the taxpayers”. This is equivalent to a thief telling you it offers better value to him to steal from you, than to enter into a commercial transaction with you.
Note that the Government has already made it clear that shareholders will receive no compensation for the value of their shares as they have set the terms of reference for an independent valuation to be on the basis that the Government loans have been withdrawn. In that case Northern Rock would clearly not be a going concern and hence would have no value. Why the Chancellor did not make this plain in his statement today is unclear.

Although the Chancellor says that Northern Rock will be operated on a commercial, arm’s length basis, historically nationalised industries in the UK weren’t terribly well managed, and when they were privatised there was usually a windfall to the new owners.

Meanwhile, a nationalised bank will be treated as an emanation of the state for the purposes of European Community law rules – rules of EC law which cannot as a practical matter be enforced against non-state-owned banks in the UK will be enforceable against a nationalised Northern Rock.

nothing new? February 14, 2008

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Yesterday, Dominique Strauss-Kahn, the Managing Director of the IMF gave a speech in which he focused on the current world financial problems:

The challenges that the Fund and its members face … have changed. In its early years, the crises that our members faced were mostly current account crises. Large scale capital movements between countries were relatively rare, and financial institutions tended to be national rather than international. And transmission of problems from the national to the global level was relatively slow. Obviously that is no longer the case.
..If we look now at the current financial crisis from this perspective we can see that what began as a problem in a single sector in a single economy—the housing market in the United States—has become a global problem. And what was first manifested as a problem for financial institutions is now becoming a problem for economies. This is obviously the case in the United States. I believe that the effects will be felt increasingly in Europe. And I do not think the emerging economies are immune from this crisis.
.. The lesson I draw from this is that we have to look for both the causes and the cures of crises in the interaction of national and global developments and in the interaction of economic and financial market developments.
.. Let me be more specific. The present crisis is the result of a perfect storm: a macroeconomic environment with a prolonged period of low interest rates, high liquidity and low volatility, which led financial institutions to underestimate risks, a breakdown of credit and risk management practices in many financial institutions, and shortcomings in financial regulation and supervision.

How new is all this? An acceleration or magnification, but not essentially really new. What is different is the enormous amount of energy that has been dedicated (apparently not too successfully) to ensuring financial stability through regulation in recent years. More than half a century ago, Karl Polanyi wrote:

By the fourth quarter of the nineteenth century, world commodity prices were the central reality in the lives of millions of Continental peasants; the repercussions of the London money market were daily noted by businessmen all over the world; and governments discussed plans for the future in light of the situation on the world capital markets. Only a madman would have doubted that the international economic system was the axis of the material existence of the race.

consultation manchester style February 14, 2008

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How can decision-makers get useful feedback from the people they answer to? This story about my hometown’s response to an invitation to express views about spending priorities from the BBC, is a bit depressing:

A hotline for people in Manchester to offer suggestions on how the council should spend its £468m budget received one phone call in a month.
Thousands of leaflets were sent out to residents with a phone number, e-mail and postal address.
In addition to the solitary call, the city council received six letters and 21 e-mails in the month-long exercise.
Council bosses admitted disappointment at the response but said it was still an important consultation.
About 2,000 copies of a leaflet with contact information were printed and sent to community centres and libraries between Christmas and New Year.

Probably not the best time to send out the leaflets, while people were worrying about how they would pay all of the seasonal bills, but still….

odd press release headlines February 12, 2008

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On Safer Internet Day, the EU Commission published a press release with the headline “Let’s listen to children: They know how to make the Internet a safer place!” It seems that talking to children is only part of the story – really they will be talking to adults too. But given the hysteria about children and the internet, what an odd headline that is.

credit cards February 11, 2008

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The UK’s Office of Fair Trading (this month is scam awareness month over there) has published a credit card comparisons report. It seems that 70% of UK consumers do not shop around for credit cards, and, as usual, wealthier people are likley to be more effective at looking after their financial interests. The report encourages the FSA to add coverage of credit cards to its moneymadeclear website, which would:

have the advantage of having almost complete market coverage, be run by a trusted organisation, and allow consumers to list products by their ‘cost of credit’ based on their typical usage.

The OFT recognises that establishing the service doesn’t necessarily mean that consumers would use it:

We also identified that a price comparison website was not a complete solution, however, as approximately 39 per cent of UK households do not have access to the internet. Additionally, there is a danger that consumers might not use the website if it is not sufficiently well advertised or sign posted.

Not a complete solution, indeed. The report suggests that older people and people in lower socio-economic groups are less likely to shop around – but the same people are also less likely to be active internet users. This solution is least likely to reach those who need it most.

framing financial regulation February 5, 2008

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I’m working on a range of issues relating to regulation in the financial services industry right now, including self-regulation and lobbying by financial firms and their trade associations. When a large French bank ignores questions raised by an exchange about strange trades, ending up with a loss of over $7bn, that raises some questions about the effectiveness of regulation and, in particular the bank’s internal systems. The sub-prime mess, too, prompts the question why no-one seems to have realised there were problems. In the run-up to the collapse of the credit markets, banks in the US were lobbying hard to keep regulators off their backs. I’m particularly interested in the ways that the multi-level nature of financial regulation (federal, national and supranational, regional etc) allows financial firms to manage the regulatory system to their own advantage. I have just been reading some comments by trade associations on the Committee of European Banking Supervisors’ proposals to amend its consultation procedures. The BBA said:

We would …suggest that CEBS considers, prior to the launching of formal consultation, a further refinement of its practices. This would be the holding of ad hoc roundtables with market practitioners, ahead of the launch of a formal consultation.
The purpose of these would be to obtain specific technical observations on a particular issue from a wide range of market participants, in an informal, but transparent way. This would then in turn inform CEBS Members ahead of themselves developing a view about a particular issue. We recognise that the Consultative Panel already undertakes an important role in relation to inputting market feedback into CEBS, but we are not entirely convinced that this is always sufficiently focussed on ensuring that a complete and well-considered market view prevails. The BBA has substantial experience of organising these industry roundtables and we can assist CEBS in their development.

LIBA, ISDA, SSBA and FASD joined together and said much the same thing:

we would encourage CEBS in the strongest possible terms to build on its informal mechanisms as much as on its formal procedures. Transparency of thinking at an early stage is one of the most powerful tools in achieving proposals that work well for all parties. Secondly we also ask CEBS to consider, when embarking on any stream of work, whether the Consultative Panel is as fully and as widely representative as it needs to be for that specific issue and to identify ways in which industry experience and input can be supplemented. Informal hearings are a good mechanism providing that there is some structure and industry has a clear view of the kinds of issues on which CEBS wishes to understand their attitudes.

These comments date back to June 2007. The real question is how would CEBS react to such statements today?