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Under the auspices of the Ministry of Finance,

Under the auspices of the Ministry of Finance, the Hellenic Capital Market Commission , the At hens University of Economics and the Federation of Greek Industries In co operation with: The Associations of Judges and Public Prosecutors of Greece

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Under the auspices of the Ministry of Finance,

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  1. Under the auspices of the Ministry of Finance, the Hellenic Capital Market Commission, the Athens University of Economics and theFederation of Greek Industries In co operation with: The Associations of Judges and Public Prosecutors of Greece 4th Three day Conference for Judicial Officers on: “Justice and Financial Law” 16-18 November 2007 Poseidon Resort, Loutraki

  2. Justice and Financial Law The Sub-Prime Crisis and Liquidity Squeeze – Legal Implications for Central Banks Rory Conway, FMLC

  3. Introduction • What is the Financial Markets Law Committee (FMLC)?

  4. The ‘liquidity crisis’ • Debt secured on US mortgages (sub-prime) • Bad debts • Uncertainty • Miss-matched assets and liabilities Illiquidity

  5. Northern Rock plc • High exposure to US ‘sub-prime’ mortgage market • Urgent need of liquidity to meet short-term liabilities • Public bail-out by central bank damages confidence of depositors and almost precipitates full scale ‘run’

  6. Central Bank ‘intervention’ • ‘Covert’ market operations

  7. Central Bank ‘intervention’ • ‘Covert’ market operations • BUT: • 1) Market Abuse Directive; and

  8. Central Bank ‘intervention’ • ‘Covert’ market operations • BUT: • 1) Market Abuse Directive; and • 2) ‘State Aid’ restrictions

  9. Central Bank ‘intervention’ • ‘Montreal Accord’

  10. Central Bank ‘intervention’ • ‘Montreal Accord’ • BUT: • 1) Competition rules

  11. Conclusions • Legal restrictions may hamper reaction to crises • Restrictions can often be circumvented • Prudent to consider in advance of crisis

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