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Liverpool decide against Suarez appeal in race abuse ban

 Liverpool will not be appealing the eight-game ban for their Uruguay international striker Luis Suarez, the English Premier League club said Tuesday.

Suarez received the suspension and a $62,000 fine for racially abusing Manchester United’s Patrice Evra in a match in October.
Their decision follows the weekend release by the English Football Association (FA) of the findings of its Independent Regulatory Commission.
A detailed 115-page report concluded that Suarez’s evidence was “unreliable” and “inconsistent”, revealing that he had called Evra a “negro” no fewer than seven times in a heated exchange.
Liverpool continued to defend Suarez in a lengthy statement on its official website, claiming the FA had constructed a “highly subjective” case against him, which was “ultimately unsubstantiated.”

Suarez, who joined Liverpool from Dutch side Ajax last season, also protested his innocence in a statement.

“Never, I repeat, never, have I had any racial problem with a team mate or individual who was of a different race or color to mine. Never,” it read.He added: “In my country, ‘negro’ is a word we use commonly, a word which doesn’t show any lack of respect and is even less so a form of racist abuse. Based on this, everything which has been said so far is totally false.”

Suarez’s ban will begin immediately, meaning he will miss Tuesday night’s clash against EPL leaders Manchester City at the Etihad Stadium.

“I do feel sorry for the fans and for my team mates whom I will not be able to help during the next month. It will be a very difficult time for me,” he said.
Liverpool manager Kenny Dalglish and his players wore Suarez t-shirts in the warm-up before their match
against Wigan last month, but ultimately the club decided not to prolong the affair.
FA: Suarez evidence ‘unreliable’
“It is time to put the Luis Suarez matter to rest and for all of us, going forward, to work together to stamp out racism in every form both inside and outside the sport,” the statement said.
His absence from the Liverpool line-up will be keenly felt during a critical period as they chase a Champions League place.
Suarez will also miss their League Cup semifinal tie against Manchester City as Dalglish bids to win his first silverware since taking charge last season.

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Macroprudential policy Risky business

 THE new big hope of central banks is called macroprudential policy. During the boom, central banks used the fairly blunt instrument of interest rates as their main weapon. But since inflationary pressures were low, thanks to the deflationary shock stemming from China and eastern Europe, rates were kept low. This led to a splurge of asset-backed lending. Meanwhile, banks found easy ways to exploit the rules of the Basle accords – designed to ensure the system was well-capitalised. As a result, when mortgage-backed securities started to plunge in value in 2007, the banks were much less robust than was previously thought.

The Bank of England has set up a financial policy committee, which is just starting the arduous task of sorting out which principles it should follow and which policy buttons it can push. In a paper out today, it sets out its options. It starts by discussing the potential flaws in financial markets such as

incentive distortions which can, for example, arise from contracts that reward short-term performance excessively

informational distortions such as those linked to buyers doubting the quality of assets (adverse selection) or less than fully rational processing of information

co-ordination problems, where collective action, for example to step away from lending in a boom, may be in the interests of individual banks but there is no way to co-ordinate on this outcome

As the paper points out (and as Hyman Minsky famously noticed) there is a tendency for banks to get overexposed to risk in the upswing of a credit cycle. After all, it is the banks that are driving the cycle. As they become more confident about lending against assets, more funds are available to investors/speculators and asset prices rise, increasing the confidence of all involved. As a proportion of GDP, commercial lending to real estate doubled between 2002 and 2008. In the UK banking system, leverage (as measured by total assets to shareholders’ claims) increased from 20:1 to 50:1 within a decade. Both measures ought to have caused alarm but nothing was done.

There is little new in this, as the paper recognizes. Credit cycles have nearly always been marked by lending against property. But property is an illiquid market and prices fall very sharply when the balance of supply and demand shifts, often wiping out of all of a bank’s collateral. Meanwhile, the duration of bank funding was steadily falling, from an average maturity of 10 years in the early 1980s to four years by 2008 (the US followed a similar trajectory). This left the banks very vulnerable to a run on liquidity.

The FPC says the authorities have, in principle, three types of measure to deal with these risks.

those that affect the balance sheets of financial institutions

those that affect the terms and conditions of loans and other financial transactions

those that influence market structures

For example, balance sheet measures include maximum leverage ratios and liquidity buffers; the second group includes caps on loan-to-value ratios and minimum margins; the third includes requirements for disclosure to reduce uncertainty about the market exposure of individual banks, but also the use of central counterparties to clear trades.

The paper then conducts an excellent and clear-eyed assessment of the pros and cons of these measures, without coming to any definite conclusion (the paper is part of a consultation process). What is clear is that the authorities cannot rely on just one or two measures, esepcially given the proved willingness of banks to game the system. Of course, the authorities cannot prevent all future financial crises, but they can still be a lot more alert than they were in the early 2000s. The paper shows the FPC is making a good start.

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