Week InReview

Sponsored research

"New securities-trading rules are having one pernicious side effect on European stock markets: Research is increasingly paid for by those being researched.

"So-called sponsored research has long been common in the bond market, where ratings firms are paid by firms to grade their credit risk. The European Union's catchily-named second Market in Financial Instruments Directive, or MiFID II, is helping extend the problem to equities."

- The Wall Street Journal

Friday | Nov 30, 2018
Mnuchin asked about Fed option that could avoid rate hikes
Treasury Secretary Steven Mnuchin is said to have privately asked bond dealers and investors in October whether they want the Federal Reserve to tighten monetary policy by raising interest rates or through faster cuts in its securities portfolio. (Bloomberg Economics | Nov 28)

Fed identifies top vulnerabilities facing U.S. financial system
In inaugural financial stability report, officials cite elevated asset prices and historically high business debt.  Officials cited potential risks tied to nonfinancial corporate borrowing , including low premiums demanded by investors in certain business debt, such as leveraged loans and high-yield corporate debt. It also flagged possible concerns in commercial real estate, in which property prices have rapidly outpaced growth in rents. (The Wall Street Journal | Nov 28)

Biggest pay raise on Wall Street goes to stock derivatives traders
As markets get wilder, some Wall Street traders are getting richer. The return of volatility might be making many rank-and-file investors queasy, but it is proving to be a boon to some trading desks at the biggest banks. (The Wall Street Journal | Nov 28)

Risky corporate debt is worrying the Fed
The U.S. economy is showing some vulnerabilities as investors increasingly buy up risky corporate debt and businesses rely on "historically high" borrowing levels, the Federal Reserve said in its first-ever financial stability report. (Bloomberg Quint | Nov 28)

Fed shifts to a less predictable approach to policy making
Federal Reserve officials will decide whether and when to raise interest rates more on the basis of the latest signs of economic vigor - such as in inflation, unemployment and growth - and less on forecast of how the economy is expected to perform in the months and years to come.  (The Wall Street Journal | Nov 27)
'Significant changes' coming to living wills
FDIC's chief says
(Nov 28) -- The Federal Deposit Insurance Corp. is overhauling the resolution plans that big banks must deliver to regulators to show how they could go through bankruptcy, Chair Jelena McWilliams said in a speech.
  • The FDIC is planning to propose changes in "coming months" to its part of the "living will" process; the Fed also oversees part of the process
  • McWilliams said her agency will start with a request for public comment
  • She said the FDIC intends to rethink the $50 bln minimum asset threshold for affected banks
  • "Now that the law has been changed, it is appropriate that we revisit that threshold, McWilliams said
  • FDIC seeks ways to tailor requirements based on more than size, to include complexity, risk and other factors
  • No bank will be forced to file a plan until changes are final, McWilliams said
The Cyber Cafe
Cybersecurity news every Friday
Your firm's cybersecurity in 7 steps
Cybersecurity is composed of layers. There is no magic bullet that will cure all. Security is often seen as an inconvenience - and it can be - but the price that your firm will pay without it will be much higher.

Hackers are using leaked NSA hacking tools to covertly hijack thousands of computers
More than a year after patches were released to thwart powerful NSA exploits that leaked online, hundreds of thousands of computers are unpatched and vulnerable. First they were used to spread ransomware. Then it was cryptocurrency mining attacks. Now, researchers say that hackers are using the leaked tools to create an even bigger malicious proxy network.

Accounting firms, schools adapting for cyberrisk, regulation
Accountants and their clients have millions of reasons to worry about data - for example, Europe's General Data Protection Regulation has fines of up to 20 million euros or 4 percent of a company's global revenues for mishandling personal data.
Binge reading disorder
Hand-curated, chosen with love
10 books for reading on long nights of winter.
It's that time of year. With the long dark winter ahead, these are what I find to be the most promising titles for cracking open in front of a fire, and digging in.

Why don't we forget how to ride a bike?
As it turns out, different types of memories are stored in distinct regions of our brains. Long-term memory is divided into two types: declarative and procedural.

Insomniacs take note: Sleeping in two shifts used to be the norm.
A good night's sleep is a relatively modern concept, but is it the right one? Segmented sleep - also known as broken sleep or biphasic sleep - worked like this. 
World Economic Forum