BoE Financial Stability Report, June 2011

The Bank of England has released its Financial Stability Report, June 2011.

Unfortunately, the Bank has taken action to ensure that the information published in this report does not fall into the wrong hands. The PDF document is secured (at the 128 bit level, no less!) in a manner which prohibits copying of extracts. Hah! That will teach Al Qaeda to quote from the Bank of England Financial Stability Report!

My attention was immediately caught by the fact that BIS concerns regarding synthetic ETFs have been given a prominent place in the threat list. Box 1 (on pages 16-17 of the PDF) points out that:

Because the collateral does not need to match the assets of the index being tracked, the bank might have incentives to use the synthetic ETF structure as a source of collateralised borrowing to fund illiquid portfolios

I’m not going to report on this any more because, quite frankly, I’m too pissed off at the moronic at worst and picayune at best restrictions on fair use imposed by the Bank’s encryption of the document. But read it; the research is quite good, which is presumably why it is being kept secret.

Update: Chart 1.4 has an interesting reference to Panigirtzoglou, N and Scammell, R (2002) ‘Analysts’ earnings forecasts and equity valuations’, Bank of England Quarterly Bulletin, Spring, pages 59-66

One Response to “BoE Financial Stability Report, June 2011”

  1. […] about synthetic ETFs were last discussed on PrefBlog when the BoE June 2011 Financial Stability Report focussed on […]

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