Academic

The Basel Committee on Banking Supervision released for comment its latest set of principles for managing big banks.  It's all very European and quite hands-off. 

• A taste of the European (that is, principles, not rules): "Supervisors should assess the adequacy of both a bank's liquidity risk management framework and its liquidity position and should take prompt action if a bank is deficient in either area in order to protect depositors and to limit potential damage to the financial system." (that's principle 1, and sometimes I wonder if the principles afficianadoes in America would really want agencies like the SEC taking "prompt action" upon finding delicts in "management frameworks")

• The hands off: "While some supervisors may find it useful to issue quantitative standards (eg limits or ratios) for liquidity risk management, where these standards exist they should not be understood as a substitute for banks? own measurement and active management of liquidity risk." (that's the guidance to principle 14, and a rebuke to the 8% of the first capital accord)

• Perhaps best of all, at least for those banking supervisors fond of Swiss hospitality, is the need for supervisors to meet regularly: "Regular dialogue and cooperation among relevant stakeholders during normal times helps to build working relationships that allow more effective communication and cooperation during times of firm-specific or market-wide stress." (that's the guidance to principle 17)

Two interesting things about the communication imperative: 1. it distinguishes between supervisors and central bankers, something that the current regulatory system in the US doesn't really do, and 2. it lauds the value of supervisors and central bankers being in close touch, which the Paulson Blueprint for American regulatory reform recommends.