BIS Quarterly Review, June 2011

About this issue

The BIS Quarterly Review for June 2011, released today, discusses how the reassessment of growth and inflation prospects in the advanced economies, as well as euro area sovereign debt concerns, drove asset prices.

The June issue also provides highlights from the latest BIS data on international banking and financial activity.

In addition, it features four articles:

1. The global output gap may be gone: while structural estimates show some slack, these tend to overestimate the gap. Statistical estimates that are less subject to bias suggest that the gap has closed entirely over the past year.
2. New methodologies lead to downgrades: in their ratings of financial institutions, credit rating agencies are putting more emphasis on systemic risk, the volatility of profits, and especially the potential for public support. As a consequence, the recent downgrading of the banking sector is likely to continue.
3. The financial cycle can lead to output fluctuations: measures that condense several financial indicators into a single variable have some predictive power for near-term output fluctuations.
4. Dealers can afford to move to central clearing: the major derivatives dealers already have sufficient unencumbered assets to meet initialmargin requirements of central counterparties. A few may need to increase their cash holdings to meet variation-margin calls.