My spies tell me that, in their big Christmas announcement, the Basel Committee will unveil a new high-tech approach to 21st century regulation.
The Global Positioning System (GPS) has become a must-have gadget for tech-heads everywhere and, like the coffee mug-holder, has become standard equipment on all new cars.
There is something exciting about getting into a new car, switching on the GPS, keying in your destination and then listening to the GPS voice giving timely and accurate advice on the journey: 'Turn left at 200 yards', she purrs.
GPS voices are, for some reason, almost always female: reassuring, comforting and non-threatening. They are mesmerizing. For example, the latest Journal of American Psychiatric Regulation has a peer-reviewed paper that identifies the emergence of a new 'Auto Erotic Disorder', where lonely men will get into their cars and cruise, often for hundreds of miles around their cities at night, just to hear a gentle, sympathetic female voice. It is estimated that GPS alone accounts for some 100 million of tons of additional CO2 emissions per year.
GPS can, however, be problematic. Police have not confirmed, but it is widely believed that Tiger Woods recently had installed a specially customized GPS with a voice resembling a Las Vegas cocktail waitress. Rumor has it that the GPS became jealous of the birdies that Tiger was scoring and (conveniently) forgot to warn him of the large tree directly in front of his car. Hell has no fury like a GPS scorned!
But, I digress.
In a bomb-proof bunker deep under the Matterhorn, Swiss scientists, under the direction of the Basel Secretariat, are developing a new device for regulating global markets, to be known as CPS or Capital Positioning System. Details are beginning to emerge on Facebook.
The concept of a CPS is similar to that of a GPS, and is designed to sit neatly on a bank CEO's desk, or on the dashboard of their Rolls Royce. A CPS will receive information from three sources: (1) market data from Reuters and Bloomberg; (2) risk data from a bank's systems; and (3) capital control signals from the new Basel III satellite.
Like a GPS, the new device will warn a CEO of impending danger, for example: 'Only 14 billion until your next Tier 1 capital raising'; 'Reverse at the next counter cyclical roundabout'; 'Stop - you are about to hit a liquidity buffer'; and so on.
If, in future, regulators decide to change leverage ratios - no need to consult, just upload to the satellite and all banks will be warned immediately.
The device is currently in beta testing for Swiss banks, but the voice, that of a Swiss yodeling champion, has been criticized as being too strident and unintelligible. It is rumored, however, that Maria Bartiromo, CNBC's 'Money Honey', is being approached to appeal to Wall Street types. Originally, Lou Dobbs was asked to be the voice of CPS in the US, but this was abandoned when the device got stuck on 'Don't turn Left, Turn Right, Turn Right!'
The new CPS device will retail around $599 but will cost more for a mock crocodile casing. We are already booking our place in the WalMart queue for the first day sale.
After a two day meeting in early December, the Basel Committee announced that it was about to release new proposals that will radically change the rules on capital adequacy.
Forget Pillar 1!
The new Basel (yet to be named/numbered) looks like a hotchpotch of all the ideas that have been floated about capital in the last year. The final proposals appear to be mainly about multiplying by whatever you first thought of by a new, very large factor, which is yet to be defined. [Incidentally, one of the key causes of the crashes (an over-reliance on what turned out to be wildly incorrect credit ratings) appears to have been put back into the too-hard basket].
Having crashed driving Basel II, maybe these novices should retain their L-plates for a few more years before they are let loose on the road again.
On the next leg of the Basel journey into the future, I am reminded of the sage words of the Irish regulator, CBFSAI, 'Wherever it is you are going, you just can't get there from here!'
