Learning Investment09 - Global policy makers re-focus their
attention on critical issues unresolved, keeping placement risky position in
derivative products can not shake the financial system as a whole. Eventually
they find a good way out, so easy with measures to safeguard it could also
threaten them back anyway.
Looking back at the beginning of the
financial crisis in 2008 ago, proved applicable derivative transactions out of
control. That said, some of the perpetrators of which make huge bets, without
preparing yourself if there is a risk if the position they have chosen is
wrong. AIG insurance for example can not fulfill its obligations of about $ 50
billion in debt-related derivative products, it’s resurrection almost dragged
some major banks of the world.
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In reply, the stakeholders rules
then reaffirms one of the main character, a clearing house. Clearing houses
located midway between the broker and collect a variety of assurances from each
of its members. The United States has moved derivative contracts were very
active to the clearing center, this step is followed by Europe. Ultimately, the
clearinghouse will play a more important role in maintaining the appearance of
systemic risk, through restrictions on profit tipping can be made by banking,
investment management institutions and investors in general.
However, clearinghouses also
presents risks that could be sustained as well. If a crisis that could lead to
bankruptcy which exceeded the collateral risk placed, they also have to use a
little of its capital to absorb losses. More than that, they will be subject to
a guarantee fund that previously paid cash and then demanded money from a
financial institution which is a major client, where all the requests made
during the crisis period in an effort to prevent the spread of this pressure
everywhere. If the sources of these funds are not enough, the government will
intervene and act to prevent a larger collapse occurred.
Indeed clearing houses is very
important to be allowed to collapse, and the current rules governing the
management of the risks they are also too weak. At least funds must guarantee
covers approximately two large main, but the clearing house is allowed to
decide how much cash we really need - and how much capital of their
shareholders should be deployed to absorb the first losses occur. The amount of
the contribution of shareholders really means a lot, by reason of fear of
losing the incentive should be prudence in setting conditions for collateral is
required as the main thing.
Several large clearing firms such as
JPMorgan Chase, Pimco and BlackRock have been aware of this deficiency, I
wonder if the stakeholders of global rules also plans to involve them also in
this year. Greater transparency and certain capital requirements would be a
good start. Regulators should also be open on the stress-test for clearing
institutions as they do on the banking of the bank, and had to ask them to
disclose sufficient information to assess the quality of their risk management
(this process appears to have started at this time). Including some researchers
have suggested that shareholders kontrobusi-contribution funds must be used to
ensure that should be larger than the current provision of 3% in both clearing
institutions in the United States or Europe.
In the end, the derivative is still
required and not as a "weapon of mass destruction" - Warren Buffet so
often call. Derivatives can make better market and provide something useful for
hedging efforts, for in accordance with the applicable rules and regulations
and incentives that are applicable in place. (Lukman Hqeem)