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Fortune magazine quoted Andy Fastow, an Enron executive, as having said, "We strip out price risk; we strip out interest risk; we strip out all the risks".
Flint is putting forward the argument that banks need to be able to include derivatives in the ring fenced back to price interest risk.
By virtue of creating asset liability mismatch, conventional long-term, fixed-rate mortgage loans inherently introduce excess interest risk to the financial systems.
The report says funds may be required to disclose conflicts of interest, risk management measures, how they value securities they hold and how long an investor's money must remain in the fund.
Considering that inflation is in part the reason for this excess interest risk, it seems natural to redesign mortgages in such a way that over time mortgage payments could, at least in part, reflect inflation.
When ratings become not just a tool for investors but the very basis for regulation, they are likely to become distorted, and conflicts of interest risk becoming sharper.Would taking credit ratings out of regulation leave investors unprotected?
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Cutting interest rates risks inflation (which would stymie entry into the euro).
There's no discipline to actually do this stuff, and you can also see this vested interest, risk-averse behavior, plus a lack of creativity.
Continued pressure under the guise of public interest risks turning into political interference.
The banks were happy to receive one-fourth of one percent interest risk-free on idle excess reserves.
"Conflict of interest" risk-of-bias domain has been proposed but not yet adopted by the Cochrane Collaboration and GRADE (Grading of Recommendations Assessment, Development and Evaluation) as an important risk of bias.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com