Netting opinion: Difference between revisions

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 === Whither the banking regulators? ===
-Now this is a polemic, we confess. Many in the industry may scorn this cavalier view. Just because we are paranoid, does not mean no-one is following us, they will say, and they may well be right. But okay, then try this: netting opinions are a regulator-mandated prudential protection. There is — clearly, joyfully, ''gleefully'' — no end of nuance that those from [[Negotiator|the guild of opinion writers]] can inject into their reasoned analyses. So why does not the Basel Committee centralise this process? Why doesn’t it own it? It could mandate and commission the opinions itself, gather them centrally, and on their basis decree, annually, for all, with which counterparty types credit institutions can and cannot prudently embark on trading relationships? Then the playing field is level; opinions are gathered once, and they apply worldwide. There is also transparency here: a central, authoritative source, and an impartial standard to which emerging markets can appeal, and against which they can measure their commercial regulations to put them in fit state for international finance.
+Now what precedes is a polemic, we confess. Some may scorn it as a cavalier view. “Just because we are paranoid, does not mean no-one is following us,” they will say, and they may well be right. Perhaps we should thank the [[Basel Committee]] for vouchsafing [[close-out netting]] all this time: that we can’t ''see'' [[Elephant|elephants hiding upside down in the custard]] may be down to the quality of their disguise, not their absence.
-Just a thought: it will never happen.{{sa}}
+But okay, then try this: netting opinions are, still, a ''regulator-mandated prudential protection''.  Like [[Emission allowances|carbon credits]], they don’t exist in the wild. The [[Basel Committee on Banking Supervision|Basel Committee]] conceived this peculiar regime of “written, reasoned opinions”, then dumped it, unchaperoned, on the market. It took no responsibility: here you are, folks: you work out what this means.
+The banks may have had no particular view on the need for, or format of, these opinions, but the legal community did. It went for broke. There is — clearly, joyfully, ''gleefully'' — no end of nuance that those from [[Negotiator|the guild of opinion writers]] can inject into their reasoned analyses. Netting opinions mutated into three-hundred page monsters. The labour of making sense of these tracts falls upon the institutions.
+The [[Basel Committee on Banking Supervision|Basel Committee]] cannot see this. It does not care about it. It made this problem — in 1986 — and has not since revisited it. It does not have to deal with it.
+So ''make it'' deal with it.
+Ask the Committee, itself, to centralise and own the process. Suggest it mandates and commissions the necessary opinions itself, and uses them to decree, annually, for all, with which counterparty types one can obtain netting. This can be issued as a simple matrix of yesses or noes: the institutions can see, but need not concern themselves about, the precise rationale. The playing field is level; opinions are gathered once, and they apply worldwide. There is also transparency here: a central, authoritative source, and an impartial standard to which emerging markets can appeal, and against which they can measure their commercial regulations to put them in fit state for international finance.
+Just a thought: it will never happen.
+{{sa}}
 *[[Netting manifesto]]
 *[[Close-out netting]]