Market information

Wednesday, January 20, 2010

A committee, led by Jaén Frijns, former director of ABP, has concluded that pension funds in recent years have had little control over the execution of the investment policy. As main cause, is mentioned that the boards of pension funds mainly consist of representatives of employers and empoyees who have little knowledge of the financial markets. This has caused that investors had did not have strict enough mandates and risk limits. Next to that, there was no good view on the liquidity risk in alternatives investments.

In the advisory report, that the Basel Committee issued last month, the committee calls for higher capital requirements for banks. The main part of the advise consists of an increase in required capital for trading for on own account; a fixed leverage ratio (which is the ratio between debt and equity); and higher capital requirements for derivatives on the balance sheet. The expectation is that, if these rules proceed, there will be great pressure on the share price of banks. The bond market is expected to respond positively, because the creditworthiness of the banks will increase. An example of this is the increase of over 12% of hybrid loans ING, since the publication of the advisory. These loans are subordinated and count as capital.

In December, inflation in the UK increased from 1.9% to 2.9% (YoY). This is the biggest rise since the start of the publication of this figure in 1997.

The 6M Euribor has dropped 1 basis point to 0.97%. The 10Y Swap remained unchanged at 3.45%.

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