ECMI Commentaries

Commentaries are short and timely comments on market developments or regulatory developments. We strive to provide our members and the public with a constant flow of these briefs to keep updated with the latest developments in the world of capital markets in Europe. You can download an electronic copy of our policy briefs for free by following the links below.

The Gloomy Scenario of Italy’s Default

ECMI Commentary 31, December 2011:  This Commentary explores what will happen if Italy is not able to implement structural reforms and if international institutions, such as the EFSF and the IMF, do not intervene with sufficient resources to prevent Europe’s second-largest economy from defaulting on its debt. It warns that the Italian economic system would certainly embark on a perverse path that would follow three phases: liquidity crisis and insolvency; deflationary pressures; and finally inflationary pressures and economic and political instability.

MiFID 2.0 Unveiled

ECMI Commentary 30, November 2011: Although the drafts of MiFID 2.0, published on October 20th, follow largely what had been proposed by the CESR (Committee of European Securities Regulators) and the European Commission, the documents took observers by surprise in both their approach and length. This CEPS Commentary explains how the original legislation has been amended with the principal aim of levelling the playing field and examines its novel features.

Commodity Prices in Boom-and-Bust Cycles

ECMI Commentary 29, June 2011: The sharp and widespread increase in most commodity prices has alarmed the world and raised questions around the sustainability of our economies. As shown in this ECMI Commentary, the reasons for this dramatic rise are multiple, and engaging in a witch-hunt benefits neither the market as a whole nor our economies. Solutions need to be more differentiated and oriented towards two factors: preventing price manipulation (through controls on net positions and on anti-competitive market structures) and fostering sustainability.

The forest of Basel III has too many trees

ECMI Commentary 28, February 2011: Senior Research Fellow Karel Lannoo surveys the radical shift in bank capital requirements confirmed by the new Basel III Accord, with its focus on more and better quality capital, especially for the large banks. He finds, however, that the new framework is becoming very complex, and asks the big question that emerges: how does one determine when a bank is effectively Basel III-compliant, as some will soon start to claim.
 

Third Country Rules for Alternative Investments: Passport flexibility comes at a price

ECMI Commentary 27, December 2010: In critically examining the rules applicable to third country managers and funds contained in the new EU Directive on Alternative Investment Fund Managers (AIFM), Mirzha de Manuel finds in an ECMI Commentary that the rules have gained in flexibility but that regulatory certainty and efficiency have suffered. A preview of this commentary was published by the Financial Times on 13 December 2010.

Where does Europe stand on regulation of alternative investments?

ECMI Commentary 26, September 2010: A new ECMI Commentary by Mirzha de Manuel and Diego Valiante reports on the latest state of play in the negotiations over the Alternative Investment Fund Managers Directive (AIFMD), an important body of EU legislation aimed at ensuring financial stability and greater transparency in areas that have so far remained mostly unregulated. 

Macro-Prudential Regulation (Avinash Persaud)

ECMI Commentary 25, August 2009: This is not the first international banking crisis the world has seen. The previous ones occurred without credit default swaps, special investment vehicles, or even credit ratings. If crises keep repeating themselves, it seems reasonable to argue that policy-makers need to carefully consider what they are doing and not just ‘double-up’ by superficially reacting to the specific features of today’s crisis.

Bringing hedge funds into the regulatory mainstream

ECMI Commentary 24, June 2009: The global financial crisis has put an end to the cosy environment in which the financial industry had operated up to now. In keeping with their G-20 commitment, the European Commission has published draft rules for hedge funds, which bring all non-harmonised funds under the EU’s regulatory umbrella, largely reproducing the rules of existing directives, and adding some new elements in response to the crisis.

Short Selling: A known unknown

ECMI Commentary 23, May 2009: Short selling is a technique that allows profiting from falling stock prices. In the autumn of 2008 several countries implemented a partial or complete ban on short selling. In this new commentary, Piero Cinquegrana, Associate Research Fellow at ECMI, reviews those decisions and attempts to answer three questions: (1) Is short selling legitimate? (2) What is the difference between covered and naked short selling? (3) Is short selling consistently defined across jurisdictions?

Why should we believe the market this time? (Paul de Grauwe)

ECMI Commentary 22, February 2009: During the decade preceding the eruption of the financial crisis in August 2007, rating agencies and market participants, gripped by euphoria, systematically underestimated the risk inherent in a wide range of financial assets. Today the panic that has gripped them leads to an equally distorted view of the risks involved. Private debt is dumped in favour of government debt of just a few countries. How these countries are selected is unclear.

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