UK Prime Minister Theresa May will call for a transitional arrangement lasting two years after Brexit to ensure the UK's departure from the EU is carried out smoothly, according to excerpts from her upcoming speech on the matter that were released by the government. She is expected to propose that the UK pay €20 billion over two years to settle its financial obligations to the EU.
Mario Draghi, speaking in his capacity as head of the European Systemic Risk Board, said financial and business cycles can become imbalanced amid low inflation, but added that monetary policy cannot be used to correct them. Emerging property bubbles are being identified in some cities, but Draghi says these issues need to be addressed at a local level.
Responding to deteriorating confidence in existing benchmarks for interest rates for the euro, the European Central Bank said it plans to develop its own overnight reference interest rate no later than 2020. The new reference rate is intended to serve as a backstop for existing private-sector benchmarks, the ECB said.
Analysts warn that major investment banks' third-quarter earnings in the US and Europe look likely to be disappointing, with some predicting falls of as much as 25% in fixed-income trading. Several managers say conditions might be equally difficult through the rest of this year.
Russia's central bank said it is nationalising B&N Bank, the regulator's second bank bailout in a matter of weeks. Sergei Gavrilov, an investment adviser at Alfa Capital in Moscow, had warned his clients in August that bank rescues were on the way.
The European Central Bank is inviting views on how financial-technology firms can apply for banking licences and register themselves as lenders, with the aim of establishing harmonised and appropriate standards. The ECB has issued a pair of draft guides and has requested comments by 2 November.
The UK's loss of access to the EU single market poses a threat to financial stability as the continuity of contracts between EU and UK counterparties is disrupted, the three European Supervisory Authorities reported. The financial regulators also predict a loss of market confidence during what will be a lengthy transition to European-based financial services.
The UK Financial Conduct Authority plans to take a close look early next year at investment firms' compliance with the strengthened reporting requirements imposed by Europe's revised Markets in Financial Instruments Directive, which takes effect in January, said Stephen Hanks, a markets policy manager. He said the FCA plans to move swiftly on reporting requirements because it is easier for firms to correct deficiencies when a new requirement takes effect than later.
S&P Global Ratings downgraded China's credit rating to A+ from AA- citing increased debt. Ratings on HSBC China, DBS Bank China and Hang Seng China were also lowered.
Banks are increasingly turning to machine learning to help them cope with stricter risk-modelling regulations. "Even if you have a simple econometric model which you can explain to the regulator, you can also use your machine-learning model as an alternative model and say, 'OK, I have checked and tested my other model with this machine-learning model'," says Mostafa Mostafavi of Credit Suisse Group.
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