Thursday, January 31, 2013

IMF - Repurchase agreements, securities lending, gold swaps and gold loans: An update

Repurchase agreements, securities lending, gold swaps and gold loans: An update
Prepared by the IMF
for the December 2004
Meeting of the Advisory Expert Group on National Accounts
(For information)
This paper is for the information of the members of the Advisory Expert Group (AEG), regarding the currently accepted treatment of repurchase agreements, securities lending without cash collateral1, gold loans, and gold swaps2. The paper also sets out areas where work is continuing by the IMF Committee on Balance of Payments (Committee) and on which the Committee will provide further reports in due course.


+ and older from 2001 about repos:

Fourteenth Meeting of the
IMF Committee on Balance of Payments Statistics
Tokyo, Japan, October 24–26, 2001
The Macroeconomic Statistical Treatment of Reverse Transactions


+ OECD doc from 2002:

Reverse Transactions

Gold Derivatives: The market view

August 2000

Jessica Cross
Virtual Metals Research
& Consulting Ltd


FSTB - Peregrine

Peregrine Fixed Income Limited (in liquidation)
Peregrine Investments Holdings Limited (in liquidation)
Pursuant to the appointment by the Financial Secretary of Richard Farrant as
Inspector under section 143(1)(a) of the Companies Ordinance (Chapter 32).
12th February 2000


"...Peregrine Investment holdings: the Chinese characteristic s of a Hong Kong
investment bank

The practices of the Hong Kong investment group Peregrine, headed by British expatriate Philip Tose and Hong Kong Ž nancier Francis Leung, also reveal the degree to which Hong Kong’s Ž nancial environment constitutes an intermeshing of global mechanisms and ethnic Chinese business norms. Peregrine was founded in 1988. By the mid 1990s, the group had emerged as the largest homegrown Southeast Asian investment bank and had risen to a position of prominence in Hong Kong’s Ž nancial scene. Through a series of corporatemanoeuvres and acquisitions, Peregrine transformed a capital base of US$38 million in late 1988 into US$5 billion in assets and ofŽ ces in 16 countries at its peak.45 Between 1991 and 1995 the Ž rm produced 160 per cent annual compound growth in turnover.46 This ascent was intimately connected to Peregrine’s Chinese Ž nancial management style—its high risk deals, centralised decisionmaking structure and reliance upon personal, in some instances political, connections were all reminiscent of traditional ethnic Chinese business strategies. Yet, in the realm of Ž nance, connections and quick decisions are of heightened importance, given the speed needed to capitalise on information. Peregrine certainly made the most of its network opportunitie s in the early to mid 1990s.
Among Hong Kong’s major investment institutions , Peregrine was the Ž rst to recognise the subtle shift of power in Hong Kong from the old British hongs to the emerging Chinese. Key relationships fostered in these early stages with major ethnic Chinese Ž nancial power brokers—Li Ka-shing, Larry Yung of CITIC PaciŽ c, Malaysian tycoon Robert Kwok—ensured that Hong Kong’s most important corporate-Ž nance deals would pass through Peregrine’s hands. Indeed, Li, CITIC and Kwok all held shares in Peregrine in the early stages. A unique trust between co-founder Philip Tose and Li—Hong Kong’s most powerful tycoon—was crucial, allowing Peregrine to access Li’s extensive network of friends and prote´ge´s. As a result of this expanding web of commercial contacts, Peregrine was consistently at the centre of major equity placements and underwriting for overseas Chinese corporations, as well as constituting a key player in Red Chip deals. For instance, when CITIC decided to buy a stake in Hongkong Telecom in 1993, it called Morgan Stanley for consultation. When the chairman of Morgan Stanley Asia, Jack Wadsworth, met with Larry Yung at CITIC, Philip Tose was already present: ‘I asked Yung what Tose was doing there’, recalls Wadsworth. He simply said, ‘I have a stake in Peregrine’. Thus ended Morgan Stanley’s hopes for an exclusive role in the deal.47 Such powerful connections ensured Peregrine’s supremacy with respect to market knowledge in Hong Kong. A 1996 share placement deal with Cheung Kong—the holding company of Li Ka-shing’s empire—is indicative of Peregrine’s Chinese style and its af uent position in Hong Kong’s Ž nancial community. Initially, Cheng Kong offered Morgan Stanley the placement, but gave the American Ž rm only 20 minutes to evaluate the plan. It declined. Yet, without hesitation, Peregrine stepped in to assume the risk and lead-manage the $US679 million deal. Within two weeks of this placement, Peregrine made a $US419 million issue for CITIC PaciŽ c and US$466 million issue for Hongkong Telecom. Connections, very quick responses via a centralised decision-making structure and a stomach for risk allowed the investment bank to broker these deals.48 Peregrine’s second co-founder, Francis Leung, was also an innovator and leading player in the Red Chip market. Of approximately US$8.2 billion raised between 1994 and 1997 through Red Chip listings, Peregrine was lead-manager— either on a sole or joint basis—of an estimated 35 per cent of the issues.49 Much of this was attributable to Leung’s network of relationships on the mainland, which actually grew with each new listing. After successfully listing and raising capital for various Chinese companies, Leung was made non-executive director at Beijing Enterprises, Shanghai Industrial, Shum Yip and other prominent Red Chips..."



Joint report by the Basle Committee on Banking Supervision
and the
Technical Committee of the International Organisation of Securities Commissions
November 1997

"This survey of disclosures about trading and derivatives activities presented in the annual reports of 79 large banks and securities firms located in the G-10 countries and one large securities firm located in Hong Kong, reveals that while trading and derivatives disclosures of many banks and securities firms have improved in recent years, there are still some institutions that disclose little or nothing about key aspects of their trading and derivatives activities.
Overall, the amount, detail and clarity of trading and derivatives-related disclosures in annual reports of banks and securities firms improved substantially over the 1993-1996 period; however, progress in disclosure practices was less pronounced in 1996 than in previous years. The most noteworthy improvements in 1996 annual reports were expanded discussions of operating and legal risks; more information about the valuation techniques for trading and derivatives activities; the accounting treatment for derivatives credit losses; and the increased amount of quantitative market risk disclosures. The Basle Committee and the IOSCO Technical Committee strongly encourage banks and securities firms to continue their efforts to develop more meaningful disclosures for their trading and derivatives activities.
Despite these improvements, there remain disparities, both within and across countries, as regards the type and usefulness of the information disclosed. Those institutions that continue to disclose little about their trading and derivatives activities are strongly encouraged to consider the quantitative and qualitative disclosures recommended by the two Committees. They should also consider disclosure initiatives by other national and international bodies, and the types of disclosures provided by their peers at the international level...


BIS - 66th annual report

 June 1996

"...The price of gold
After several years of trading within a fairly narrow price range, gold rallied to over $400 per ounce in early 1996 (Graph VI.12). Gold producers' opportunistic hedging through forward and short sales in part accounts for the stability of prices in 1994 and 1995: every time the price started to rise, producers would take action to lock in their revenues. The increased scale of such hedging may help account for the extraordinary rise in gold lease rates in the approach to the turn of the year 1995/96. That is, when gold lenders followed their usual practice of reducing their credit exposures at end-year, those who needed to borrow gold to sell it short had to offer unusual compensation.

After the turn of the year, when speculative buying pushed the price above this well-established range, some gold producers scaled back their hedging, putting their shareholders in a position to benefit sooner than previously from any sustained rise in the price of gold. As observed above with regard to currencies, the movement of the gold price outside its recent trading range was also associated with a rise in volatility (although in this case measured by realised price movements rather than by implied volatility). More recently, gold has traded fairly calmly at prices below $400 an ounce..."


SNB - The new investment policy of the Swiss National Bank

Philipp Hildebrand: The new investment policy of the Swiss National Bank
Introductory remarks by Mr Philipp Hildebrand,
Member of the Governing Board of the Swiss National Bank,
at the half-yearly media news conference,
Geneva, 17 June 2004.

"1. The evolution of the new investment policy
The new National Bank Act has been in force since 1 May 2004. The management of monetary reserves is explicitly mentioned in the NBA as part of the Swiss National Bank’s mandate for the first time. The management of these reserves is subject to the primacy of monetary policy and implemented according to the criteria of liquidity, security and return. In so doing, the National Bank
must guarantee professional, modern asset management and risk management.
Until the mid-1990s, the National Bank only had limited possibilities for managing its assets. Monetary reserves were mainly held in the form of gold and foreign-currency government bonds with a maturity of less than one year. Accounting for approximately 80%, the US dollar was the main reserve currency. An easing of investment regulations came about in 1997 when the legally prescribed maximum term for bonds was repealed and repo and gold lending business was introduced. At the same time, the National Bank began to diversify currency risks on its investments to a greater degree and gradually reduced the US dollar portion. The new Act takes this a step further and leaves the permissible investment universe completely open..."


Wednesday, January 30, 2013

German Monetary History in the Second Half of the Twentieth Century

German Monetary History in the Second Half of the Twentieth Century: From the Deutsche Mark to the Euro
Robert L. Hetzel

"Starting in January 2002, citizens of the European Monetary Union (EMU) replaced their national currencies with the Euro, issued by the European Central Bank (ECB). Europeans created a new pan-European central bank as a symbol of a future united Europe. However, what historical process explains the broad monetary policy of the ECB, that is, its objective of price stability and its strategy for achieving that objective? The short answer is that its founders designed the ECB to look like the Bundesbank. How then did the Bundesbank evolve? To answer that question, I survey German monetary policy in the second half of the twentieth century.

I divide this history into three main sections.

The first treats the BrettonWoods system of fixed exchange rates. 

The second treats the floating exchange rate period that began in 1973. It chronicles the Bundesbank’s ultimate decision to accord primacy to reducing inflation rather than unemployment. 

The last explains how the Bundesbank dealt with the pressures created by movement toward a single European currency. 

The evolution of the Bundesbank into an institution now identified as a modern central bank is fundamental to the article. A modern central bank This article follows Hetzel (2002), which summarizes German monetary policy in the first half of the twentieth century. The author gratefully acknowledges helpful comments from Michael Dotsey, Martin M. Fase, Andreas Hornstein, Thomas Humphrey, Joachim Scheide, and Alex Wolman. The views expressed in this article are those of the author and not necessarily those of the Federal Reserve Bank of Richmond or the Federal Reserve System. 1 An examination of the monetary policies that central banks pursue requires a framework for understanding their choice of objectives and the way that they achieve those objectives. The Federal Reserve

"...At Maastricht in December 1991, members of the European Union signed the Treaty on European Union, which laid down conditions for membership in the EMU. Monetary union required that Germany forsake the DM—the symbol of everything that it had done right afterWorldWar II. German public opinion could accept such a sacrifice only if EMU members adopted the German model of stability symbolized by the Bundesbank (New York Times 15 March 2000, C1). France acceded for the sake of its foreign policy objectives of countering U.S. worldwide hegemonic influence and German European hegemonic influence (Dyson and Featherstone 1999, 252; Marsh 1992, 204). In 1990, Bundesbank president P¨ohl chaired the Committee of EC Central Bank Governors that drafted the ECB statute, and the Bundesbank prepared the single draft for negotiations. The Bundesbank worked to preserve its Stabilitatspolitik.41 It replaced the ambiguous reference in the Bundesbank Law of 1957 to “safeguarding the currency” with the explicit language, “the primary objective of the ESCB shall be to maintain price stability..."


Buba gold

Very interesting.


Friday, January 25, 2013

CB - Speech by Wim Duisenberg, President of the ECB

Speech by Wim Duisenberg, President of the ECB

SPEECH - Speech delivered by Dr. Willem F. Duisenberg, President of the European Central Bank at the plenary session of European Union Committee of the Regions, Brussels, 14 November.

Source: Central Banking | 22 Nov 2001 

"...Another source of divergence in the rates of price changes across euro area countries or regions may arise when countries or regions are affected by economic or policy shocks which are different in their nature or timing, or when, due to different economic structures, local economies respond differently to a common shock. One example of this would be a change in the oil price. Although this is a common shock to the whole euro area, countries and regions in the euro area can be affected to a different extent, depending on their particular demand for (or supply of) energy.,,"


ECB - 1999 - A new European monetary system

Speech by Wim Duisenberg, President of the European Monetary Institute, at the conference "The euro and the European innovative industry" in Toulouse, France, on 17 October 1997


Stage Three of Monetary Union is little more than 14 months away. Preparations for this historic project are underway. As far as the EMI is concerned, the operational framework for the ESCB's monetary policy has been defined and specified; we have entered the stage of technical implementation.

EMU will contribute to the creation of a large zone of monetary stability in Europe. The euro, in particular, will be a strong and stable currency that will foster further economic and financial integration among member countries, thereby completing the internal market. It can be expected, nevertheless, that not all countries will initially participate in the euro area. Some may opt out; others might not yet be ready by 1 January 1999 as regards economic convergence. The question thus arises of how to avoid that the euro produces divisions within the European Union, between those that are in the euro area and those that are outside, with potential foreign exchange turbulences that endanger the internal market..."


ECB - WD - 6 August 2005

Speech during the memorial service for Wim Duisenberg on 6 August 2005 in the Concertgebouw, Amsterdam
Speech by Jean-Claude Trichet, President of the ECB,
6 August 2005

As far as demanding circumstances and exceptional challenges are concerned, Wim had, like all of us, his fair share. Then his unique qualities worked wonders. I would like particularly to mention three examples:
  • Wim’s firm position in the 1980s and 90s, when there were dramatic periods of increased tension and outright crisis and, notably, in 1992 and 1993.
  • The influence he exerted in the DELORS Committee, taking action at all crucial moments to permit the effective delivery of what became the blueprint for the single currency.
  • Equally, Wim’s influence at the European Monetary Institute under the chairmanship of Alexandre Lamfalussy and as President, where the crucial decisions to prepare effectively the single currency were wisely taken, including the decision that the ECB should have all its accounts in euro from the outset, which owed a lot to Wim.


EUI - Macroeconomic and Monetary Thought at the European Commission in the 1960s

Ivo Maes


Tuesday, January 22, 2013

ERT - Giants - sequel

"...Etienne Davignon and his colleague Francois-Xavier Ortoli, Commissioner for Economic and Monetary Affairs, attended the later stages of the April founding meeting in Paris. It was the occasion for a great deal of lively debate and the first airing of many of the ideas and concerns that were to preoccupy ERT for the coming 20 years: high costs and low profits, fragmentation of the European market and excessive interference by governments, and the fundamental need to maintain and rebuild an industrial base in Europe across a broad strategic front, from new technologies to telecommunications. The discussion was sufficiently fruitful to convince those present that it was worth going ahead.
The organisation, charter and financial arrangements for ERT were agreed at a second meeting of Members (afterwards always referred to as "Plenary Sessions”) on 1 June 1983 in Amsterdam. The overarching objective would be to promote competition and competitiveness on a continental scale.
Volvo was charged with setting up a small Secretariat inside one of its Paris-based divisions. In 1985 ERT appointed its first full-time Secretary General, Peter Ekenger, and hired an office in Paris..."


"...ERT’s “core business” since the mid-1980s has been securing the development and implementation of the European Single Market programme. Jacques Delors, past President of the European Commission (1985-1995) and one of the key advocates of the Single Market, has publicly recognised the important role played by ERT in this area.
Today, the organisation maintains a sharp vision of the Single Market structure needed to offer economies of scale and competitiveness in the global market. It continues, therefore, to argue for the elimination of the still-powerful obstacles that prevent business securing the full benefits of the Single Market. In recent years it has campaigned vigorously, for example, for a Community patent system and an end to fragmented national regulations that frustrate efforts towards entrepreneurship and innovation.
ERT’s first competitive priority was infrastructure. Its 1984 report “Missing Links”, proposed three major infrastructure projects: Euro-Route – a Channel link between England and France, Scanlink – a plan to fill in the road and rail gaps between Norway, Sweden, Denmark and Northern Germany; and proposals for a trans-European network of high-speed trains.
It would be exaggerated to claim sole credit for these projects, but the ERT report certainly contributed to the ongoing discussion and later to the realisation of all three projects in modified form.
The Treaty of Maastricht and its timetable for European Economic and Monetary Union (EMU) was welcomed by ERT, as it regarded a single currency as a necessary pillar for the Single Market, and a means to reduce the cost of doing business. Members were active in encouraging the successful implementation of the Maastricht timetable based on the adoption of the euro as the single currency in 1999 and the introduction of euro notes and coins in 2002..."



Monday, January 21, 2013

EUI - EPU/EMA - European Payments Union/European Monetary Agreement

documents from 07/1950 to 11/1965 

The European Pyaments Union set out to provide an automatic mechanism for the settlement of net surpluses and deficits of OEEC member countries by gold payments and credit, granted through a central agency. The BIS (Bank of International Settlements) in Basle, acted as agent for the OEEC in respect of the EPU operations, expressing Member countries credits and deficits with each other in a single credit or deficit balance with the EPU each month. As a key component of the OEEC, the EPU was both an instrument of Europe's economic recovery and integration, and an important factor in its transition from bilateralism to currency convertibility. The EPU provided the basis which enabled all the western European currencies to be transferable into one another, thereby enhancing the OEEC's efforts in liberalising intra-European trade from quantitative restrictions and discriminatory regulations. The successor to this initiative was signed in 1955 and came into force in 1959 following the termination of the EPU. The Agreement provided a framework for monetary co-operation in Europe during the period of transition to full convertibility of currencies. Furthermore the EMA acted as a multilateral mechanism for an exchange guarantee on central banks holdings of member country currencies. 


X. Ortoli - bepa



Wednesday, January 2, 2013

ECB -  Key dates of the financial crisis (since December 2005)

Interested in finding out more about the worldwide economic and financial crisis?
Explore the interactive timeline of the financial crisis on the website of the European Central Bank: Click on key dates and events to find background information and links to related articles and press releases.
Another source of interesting information on the same subject, is the article What is the role played by the Eurosystem during the financial crisis?, published in the September issue 2012 of the Economic Review of the National Bank of Belgium.


NBB - Chinese Metallic Money and Cash

"Chinese monetary history is a topic that requires readers to leave behind certain concepts that have characterised our money for some time. The emergence of metallic money gave rise to two distinct traditions. The first, which the West has inherited, originated in Mesopotamia around the second millennium BC and is characterised by the use of precious metals as a payment instrument. The so-called intrinsic value of the money is determined by the weight and purity of the metal. In China, by contrast, money has had an eminently fiduciary character from the start. Its value was guaranteed by ties of trust between economic agents and the issuer, but most importantly by quantitative control of the coinage. Chinese metallic money, in general, was thus conditioned by its singular function, facilitating transactions. Currencies with a high intrinsic value (gold, jade, silver, tortoise shell, etc.) were used as stores of value. Putting these into circulation would have led to hoarding, which would have prevented them from serving their function. .."