E-encyclopedia of banking, stock exchange and finance

Selected letter: T


    The digital economy and peer-to-peer (P2P) businesses have grown at amazing rates, together with the perception that it they are far less regulated and taxed than traditional types of business; transaction costs have been eliminated. The rapid explosion of P2P platforms in the hospitality and tourism sectors has raised questions about whether these new entrants enjoy a tax-advantage if compared with traditional businesses, violating the principle of tax neutrality.

    The digitalisation of the economy represents a challenge for policy makers that need to radically change their rules, and behaviour in order to achieve their goals (i.e., competition, redistribution, efficiency, etc.).
    The Peer-To-Peer (P2P) economy can be described as a collection of virtual marketplaces that connect individuals looking to trade goods and services with one another through digital platforms. On one side, there are buyers, who want specific goods or services and, on the other, the sellers that own the good to be sold (or rented) or control the assets needed to provide the service. The definition of the P2P economy remains open; new digital P2P activities like the “sharing economy” and the “gig economy” can be appropriate, but partial.

    Table 1. Examples of Peer-to-Peer (P2P) platforms across sectors (IMF 2017 p.59)
    Delivery Deliveroo, Instacart, Postmates
    Digital Currencies Bitcoin, Ethereum
    Financial services Funding Circle, Lending Club, Kickstarter, Prosper, SoFi
    Retail business Amazon, Craigslist, eBay, Etsy
    Software-, Knowledge-, and Media-Sharing Apple iTunes, Coursera, Dropbox, Wikipedia
    Professional Services Fiverr, Freelancer, Taskrabbit, Thumbtack, Upwork
    Traveler Accommodation Airbnb, Flipkey, Homeaway
    Transit and Ground Passenger Transportation BlaBlaCar, Careem, Didi Chuxing, Lyft, Ola, Uber

    The digital economy and peer-to-peer (P2P) businesses have grown at amazing rates, together with the perception that it they are far less regulated and taxed than traditional types of business (G20 2019). This can distort competition, giving P2P an unfair advantage over competing businesses in the same sectors; at the same time, they have positive effects in the market, since thy put pressure on old businesses, enhancing efficiency. Whether P2P economy users are “subject to lower taxation - because of preferential rates or simply underreporting of income -government tax revenues may be at risk, especially if other more tax-rich activities are being displaced. At the same time, it is possible that this new way of doing business is formalizing activities in certain sectors, bringing them within reach of the regulatory and tax authorities” (IMF 2017, p. 58).
    Innovation in the way markets work is not a recent event, but what distinguishes P2P businesses is the technologies that allows individuals to barter. Transaction costs have been eliminated, but P2P also circumvented certain rules in traditional businesses.
    The rapid explosion of P2P platforms in the hospitality and tourism sectors has raised questions about whether these new entrants enjoy a tax-advantage if compared with traditional businesses, violating the principle of tax neutrality. Many cities in the State of California (U.S.A.) have been trying to regulate this new business, without making it illegal, but compensating for tax-advantage and guaranteeing safety and quality.
    In Europe some States / Regions have introduced regulations aimed at limiting the phenomenon without banning it.
    The ride-sharing industry has been another very important area of public interventions; traffic represents a source of inefficiency in large cities worldwide, and the question of whether drivers are employees or self-employed has been a source of controversy in Europe and in the U.S.A.. It can have important implications for the burden of tax, as well as for social insurance and benefits. The city of London in the U.K. has regulated the ride-sharing business such as drivers are employees. The European High Court of Justice (2017) has ruled that individual states must regulate the phenomenon;; in some areas in Europe, such as Bulgaria, the ride-sharing service is banned. In Italy the regulation is municipal and there is the obligation to license the ride-sharing service, in compliance with the EU ruling.
    The growth of commercial platforms like Amazon, Alibaba and Ebay constitute a certain threat to public authorities especially in Europe and the U.S., since these businesses are mostly located in foreign countries, as legal entities, and then do not pay corporate taxes, are not subject to strict labour market rules, and negatively contribute on employment. Traditional commercial places (shops, malls and stores) do pay corporate taxes, and are subject to strict labour market rules, thus suffering of unfair competition. Governments have become aware of the need to clarify tax obligations for users of the P2P economy with some having already issued specific guidance (G20 2019). They have also recognized the potential benefits of getting access to and using the large amount of information held by digital platforms for enhancing compliance (Taxation and Digitalization).
    P2P business have some common characteristics; the first is the low barriers to entry that allows buyers and sellers to switch roles easily and quickly. The second is the different degrees of control over users; some platform select sellers, and impose strict codes of conduct. The third is the revenue-generating model based on commissions (fixed or variable) ranging from 1-2 percent for lending to up to 20 percent for transportation network companies, and with more than 85 percent of the value of transactions facilitated received by the seller.
    P2P business are global, but the largest are located in Asia (AliBaba and DiDiChuXing). Global platforms, like Amazon and Ebay have been replicate locally in some countries, to satisfy certain necessities (e.g. in the Middle East and in South America). The number of users and the dimension of transaction/income are only anecdotal (IMF 2017, p.61).
    The effect of P2P business on traditional activities, like transport services and hotels, is complex to measure, but some authors estimate a loss of 8-10% revenue as incumbents are forced to lower prices not to loose market's shares (more details are available in the IMF report published in 2017).
    The G20 has tried to define common principles that define the taxation mechanisms of these businesses in many meetings; some countries, including European ones, are introducing measures aimed at increasing the revenue, often null, that comes from these exchange platforms; these policies, however, are implemented in an uncoordinated manner and constitute economic barriers to trade, to business. In the immediate future it is hoped that the G20 will be able to define a shared fiscal policy to balance the revenue; however, this policy must be accompanied by an increase in digital literacy for users, life-long learning and the use of new technologies in education and the world of work.
    The G20 has tried to define common principles that define the taxation mechanisms of these businesses in many meetings; some countries, including European ones, are introducing measures aimed at increasing the revenue, often null, that comes from these exchange platforms; these policies, however, are implemented in an uncoordinated manner and constitute economic barriers to trade, to business. In the immediate future it is hoped that the G20 will be able to define a shared fiscal policy to balance the revenue; however, this policy must be accompanied by an increase in digital literacy for users, life-long learning and the use of new technologies in education and the world of work.

    G20 (2019) Ministerial Meeting on Trade and Digital Economy Recommendations for Promoting Innovation, Digital Technologies, and Trade. 16 May 2019.
    International Monetary Fund (IMF) 2017. Digital revolutions in public finance. Edited by Sanjeev Gupta, Washington, DC, ISBN 9781484315224.


    The Taylor rule (TR) is a monetary-policy rule developed by John Taylor (1993). It states that the central bank must modulate the short-term interest rate (e.g. Federal Fund rate) in response to discrepancy between the actual inflation rates and the target inflation rates, and between the actual and potential output. The TR can be written as follows:

    - it is the policy instrument and is the interest rate consistent with full employment;
    - is the actual rate of inflation and is the inflation target;
    - is the actual aggregate output and is the potential output;
    According to the TR, when inflation is above its target or when the production is above its potential level, the central bank should rise the interest rate. On the contrary, when inflation is below its target or when the output is below potential output level, a so-called “easy” monetary policy is recommended.
    Taylor J.B. (1993), "Discretion Versus Policy Rules in Practice", Carnegie-Rochester Conference Series on Public Policy, Vol. 39, pp. 195-214.
    Editor: Lorenzo CARBONARI
    © 2009 ASSONEBB


    Technical Barriers to Trade (TBT), a category of nontariff barriers to trade, are the widely divergent measures that countries use to discriminate against imports in order to protect domestic industries but they also can be used to to regulate markets, protect their consumers, or preserve their natural resources. Technical regulations and standards set out specific characteristics of a product, such as its size, shape, design, functions and performance, or the way it is labelled or packaged before it is put on sale. In certain cases, the way a product is produced can affect these characteristics, and it may then prove more appropriate to draft technical regulations and standards in terms of a product's process and production methods rather than its characteristics per se. The World Trade Organization Agreement on Technical Barriers to Trade (TBT) aims to ensure that these do not create unnecessary obstacles.

    The Agreement tries to ensure that regulations, standards, testing and certification procedures do not create trade restraints, while also providing members with the right to implement measures to achieve legitimate policy objectives, such as the protection of human health and safety, or the environment. TBT Agreement, is an international treaty administered by the World Trade Organization (WTO). It was last renegotiated during the Uruguay Round of the General Agreement on Tariffs and Trade (GATT), with its present form entering into force with the establishment of the WTO at the beginning of 1995.

    Editor: Giovanni AVERSA


    It represents the price that considers accrued interest/dividend matured until the settlement date. The following formula holds:
    tel quel price = clean price + accrued interest
    Editor: Ugo TRENTA
    © 2009 ASSONEBB

  • Temporal Law of Stochastic Process

    It is the allocation of distribution functions of joint probabilities, of each family of finite random variables. In fact, the probabilistic characterization of a stochastic process Y(t) is obtained by assigning the joint distribution of each finite family of random variables. So given the random variables and the time index:

    the temporal law is assigned with:


    AA.VV., Matematica Finanziaria, Monduzzi Editore, 1998

    Grinstead M. C., Snell J. L., Introduction to Probability, American Mathematical Society, 1997

    Editor: Giuliano DI TOMMASO


    It is a form of direct private long-term financing, consisting in a direct business loan of a fixed amount with a maturity between one and 20 years. The specified terms may include also provisions regarding the repayment schedule. The typical term loan is amortised over the life of the loan by equal instalments covering interests and principal, but other arrangements can be made, such as a "balloon" payment (the majority of the capital is paid in a large final payment) or a "bullet" payment (all the capital is paid at the maturity date). The interest rates charged can be floating or fixed. In the latter case, the interest charged is usually higher to reflect the advantages of the borrower. The interest rates on term loans are typically higher than those on equivalent public issues because they are easier to be renegotiated in the event of a default, and they entail lower transaction costs (like distribution costs). The term loans are generally drawn down in instalments and the lender, normally a commercial bank or an insurance company, retains the right to withdraw the loan at short notice in case of overdraft. The lender has also the right of termination if the borrower does not meet all the obligations included in the accompanying documentation, such as information flows to the bank as well as financial ratio constraints.

    Arnold G.(2002), Corporate Financial Management, Pearson Education

    Editor: Bianca GIANNINI
    © 2010 ASSONEBB



    The EU 4th Money Laundering Directive will come into place in 2015 to improve transparency, information and effectively fight against financial crimes; the legal instruments employed to achieve greater financial stability are the Directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, and the Regulation on information accompanying transfers of funds to secure ‘due traceability’ of these transfers. In this new regulatory framework, supervision of payment institutions represents one of the most important issues.

    1. The forthcoming EU 4th Money Laundering Directive (AMLD): the regulatory framework and the new fundamental rules.

    With the forthcoming EU 4th Money Laundering Directive (AMLD) the European Union is now putting in place a framework which focuses on greater effectiveness and improved transparency in order to make it harder for criminals to abuse the financial system, for example enhancing beneficial ownership transparency introducing new investigative tools.
    Significant progress has been achieved on the review package which, as know, consists of two legal instruments: a new Directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing and a Regulation on information accompanying transfers of funds to secure ‘due traceability’ of these transfers.
    These proposals take into account the 2012 Recommendations of the Financial Action Task Force (FATF), and go further to promote the highest standards for anti-money laundering and counter terrorism financing.
    The proposal for a Fourth Directive implementing the FATF Recommendations has been the subject of intense negotiations in the Council and the European Parliament for nearly two years. The Italian Presidency of the EU Council reached December 16, 2014 an agreement with the European Parliament on the Fourth Money Laundering Directive and the Regulation on funds transfers. At the moment, at the request from France, in light of the recent events, it needs more time to scrutinise the text on terrorist financing. However this does not affect the agreed texts and it does not have any consequences for the procedural steps to follow.
    The new regulatory framework welcomes the risk-based approach: it acknowledges that the levels and types of action required to be taken by member States, supervisors and firms will differ according to the nature and severity of risks in particular jurisdictions and sectors, clarifying the types of situations in which simplified customer due diligence will be appropriate, as well as those situations where it is necessary for firms to conduct enhanced checks.
    We have new rules concerning the extended definition of politically exposed persons … PEPs (here is clarified that enhanced due diligence will always be appropriate where transactions involve politically exposed persons), inclusion of tax crimes as predicate offences, national and Europe-wide risk assessments, reinforcement of sanctioning powers and requirements to co-ordinate cross-border action, lower exemptions for one-off transactions and expansion of the perimeter, new requirements on beneficial ownership information, to increase transparency by requiring companies and trusts to hold information on their beneficial ownership, and to make this information available to supervisors and parties conducting due diligence on them.

    2. The problem of supervision of payment institutions that operate across borders by agents.

    In this new regulatory framework, we have the problem of supervision of payment institutions that operate across borders by agents. In fact most Member States result host some agents operating on a European passport under the EU Payment System Directive (PSD); a large number of Member States act as the home regulator for cross border Payment Institutions.
    Risks associated with the Money Transfer sector, especially operating through agents, are considered very high.
    For example, in Italy money laundering and financing terrorism risks associated with the Money Transfer sector are considered very high, due also to the size of the Italian money remittance market: amongst the EU countries, the Italian market is the second biggest one in terms of money remittance flows directed abroad (eur 7,39 mld in the 2011). In 2011 the market share of the Money remitters based in another EU country operating in Italy through very extensive networks of agents was equal to 55%.
    In this framework, various criminal investigations found out that the money transfer networks are misused for money laundering purposes or for terrorist financing purposes by criminal organizations. Italy is conducting a specific risk assessment of the payment services sector in the broader works undertaken to draft the Italian National Risk Assessment.
    In Portugal, PS agents, whenever they are not financial institutions, are considered as presenting an inherent ML/FT high-risk. This is the case due to their absence of control mechanisms in terms of the prevention of AML/CFT on the overwhelming number of agents operating in these conditions (gas stations, subway stations, supermarkets).
    According to FATF’s new Recommendation 14 on money or value transfer services providers, MVTS providers should be required to be licensed or registered. MVTS providers should be subject to monitoring for AML/CFT compliance. Agents for MVTS providers should be required to be licensed or registered by a competent authority, or the MVTS provider should be required to maintain a current list of its agents accessible by competent authorities in the countries in which the MVTS provider and its agents operate. According to para. 14.5, MVTS providers that use agents should be required to include them in their AML/CFT programmes and monitor them for compliance with these programmes.
    Agents pursuing their activities on the basis of PSD Article 25, regarding the exercise of the right of establishment and freedom to provide services. According to this rule, any authorised payment institution wishing to provide payment services for the first time in a Member State other than its home Member State, in exercise of the right of establishment or the freedom to provide services, shall so inform the competent authorities in its home Member State. Within one month of receiving that information, the competent authorities of the home Member State shall inform the competent authorities of the host Member State of the name and address of the payment institution, the names of those responsible for the management of the branch, its organisational structure and of the kind of payment services it intends to provide in the territory of the host Member State. In order to carry out the controls in respect of the agent, branch or entity to which activities are outsourced of a payment institution located in the territory of another Member State, the competent authorities of the home Member State shall cooperate with the competent authorities of the host Member State. The competent authorities of the home Member State shall notify the competent authorities of the host Member State whenever they intend to carry out an on-site inspection in the territory of the latter. However, if they so wish, the competent authorities of the home Member State may delegate to the competent authorities of the host Member State the task of carrying out on-site inspections of the institution concerned. The competent authorities shall provide each other with all essential and/or relevant information, in particular in the case of infringements or suspected infringements by an agent, a branch or an entity to which activities are outsourced. In this regard, the competent authorities shall communicate, upon request, all relevant information and, on their own initiative, all essential information.

    3. The requirement of Central Contact Points in some European national legislations.

    In EU Member States, there have been reported some cases of countries where the requirement of a central contact point has been set up by their national legislation.
    In Italy, the reference to CCPs has been included in Article 42 of the Legislative Decree 231/2007 (Italian AML law) after its recent amendment by the Legislative Decree 164/2012. According to para. 3, the STR (suspicious transaction report) shall be submitted to the Financial Intelligence Unit by the agents of the PIs directly or through the CCP created in Italy by the EU EMI or PI. The creation of the Contact Point is mandatory in case of plurality of agents.
    Payment institutions agents operating in Italy are subject to the Italian AML regulations; so they are obliged to comply also with the Italian Customer Due Diligence and record keeping requirements. At the moment, the Italian law provides a role for the central contact point (CCP) only in relation with the STRs. But, in their understanding, payment institutions are very likely to assign to the central contact point also coordination and supervisory role with regard to the other pieces of the AML obligations applicable to the agents operating in Italy.
    In Belgium, Belgian AML law applies to payment institutions/electronic money institutions "providing payment services in Belgium through a person established there and representing the institution to this end". PIs/EMIs with such an establishment in Belgium are subject to all the provisions of the Belgian AML law, including article 18 which provides that the obliged entities "shall assign responsibility for the implementation of this Law to one or more persons within their institution or profession. These persons shall primarily be responsible for implementing the policies and procedures referred to in Articles 16 and 17, as well as for examining the written reports drawn up in accordance with Article 14, § 2, second subparagraph , in order that appropriate action may be taken, where necessary, in accordance with Articles 23 to 28. [...] In the cases referred to in Article 2, § 1, 4ter, c) and 4quater, e) [i.e. in the case of PIs /EMIs providing payment services in Belgium through a person established there and representing the institution to this end] a person responsible for the implementation of this Law should be established in Belgium". This person responsible for the implementation by the EEA PIs/EMIs of the Belgian AML law is the Belgian CCP, even if the Belgian Legislation doesn’t make use of that expression. Belgian AML law applies to all PIs/EMIs providing payment services in Belgium "through a person established there and representing the institution to this end". The wording "through a person established there and representing the institution to this end" is meant to capture any form of establishment in Belgium (other than branches, already mentioned in another subparagraph), provided the establishment has the power to represent the PI/EMI.
    Functions of the CCP result from Article 18 of the Belgian AML law. The main functions of an officer responsible for preventing money-laundering and the financing of terrorism …and hence of a Belgian CCP… consist in: examining the written reports relating to atypical transactions which are communicated to it and drawn up in accordance with Article 14, § 2, second subparagraph of the Law; deciding if such atypical transactions are suspicious and in filing, if this is the case, a suspicious transaction report to the Belgian FIU (CTIF-CFI) in accordance with Articles 23 to 28 of the Law; implementing the policies and procedures referred to in Articles 16 and 17. This includes the implementation of the internal measures and control procedures set out by the PI/EME in order to ensure compliance with Belgian AML law, the implementation of the group AML policy and the implementation of the measures taken by the EME/PI to train their representatives in terms of AML obligations.
    In Spain, according to the Spanish legislation, if an EU payment/e-money institution designates more than one agent in Spain for the provision of payment services, the agents would constitute a network of agents. In accordance with Articles 4.2 and 10.4 of Royal Decree 712/2010, Banco de Espana shall hold a register of persons responsible for the network of agents, and its establishment will be subject to the same procedure established in regard to branches of EU payment institutions. That means it is necessary for the PIs/EMIs to designate and communicate to Banco de Espana both a person in charge of the agents’ network and contact address in Spain. The provisions above are included in the template of communication that Bank of Spain sends to the PI, once it has received notice from the Home Supervisor.
    The legislation does not explicitly mention a "central contact point", but since the agents’ network are considered similar to a branch, a central contact point is therefore a mandatory requirement. Furthermore, according to the regulation, agents of foreign PI must, in the exercise of their activity in Spain, observe the same rules of law that the agents of any Spanish PI must observe.
    InPortugal, the draft rule through which the Portuguese Supervisory Authority intend to implement the requirement of the Central Contact Point for payment institutions is an Aviso do Banco de Portugal. A preliminary version was published in March 2013. In a more up-to-date version of the Article 7 of the draft Aviso do Banco de Portugal, which regulates the agents of foreign Payment Institutions or e-money institutions, according to its third paragraph, in order to facilitate the exercise of AML/CFT supervision and improve compliance with the related regulation, EU payment or e-money institutions must promote the creation in Portugal of a Central Contact Point, whenever they operate in Portugal through one or more agent or third party with operational functions.
    The appointment must be done before providing such activities in Portugal through one or more agent/third party with operational functions. This central contact point must also be ensured by a natural or legal person who has a physical structure permanently adequate to meet the functions and who must be any of the financial institutions identified in Article 3 (among them, credit institutions or payment institutions, including branches of foreign ones) or act as an agent on a local or foreign PI or EMI.

    4. The new 4th AMLD and PSD 2 rules.

    In this context, now we are facing the new 4th AML Directive and PSD 2 rules. According to Recital (37a) of the new 4th AML Directive, where Member States decide to require issuers of electronic money and payment service providers established on their territory in forms other than a branch, and whose head office is situated in another Member State, to appoint a central contact point in their territory, they may require that such a central contact point, acting on behalf of the appointing institution, ensures the establishments’ compliance with AML/CFT rules. They should also ensure that this requirement is proportionate and does not go beyond what is necessary to achieve the aim of ensuring the compliance with AML/CFT rules, including by facilitating the respective supervision.
    According to Recital (38b)of the new 4th AML Directive, where an obliged entity operates establishments in another Member State, including through a network of agents or persons distributing electronic money according to Article 3 (4) of Directive 2009/110/EC, the host country’s competent authority retains responsibility for enforcing the establishment’s compliance with AML/CTF requirements, including, where apropriate, by carrying out onsite inspections and offsite monitoring and by taking appropriate and proportional measures to address serious infringements of these requirements. The host country’s competent authority should cooperate closely with the home country’s competent authority and inform the home country’s competent authority of any issues that could affect their assessment of the obliged entity’s application of group AML/CTF policies and processes. In order to remove serious infringements of AML/CFT rules that require immediate remedies, the host country’s competent authority may be empowered to apply appropriate and proportionate temporary remedial measures, applicable under similar circumstances to obliged entities under their competence, to address such serious failings, where appropriate, with the assistance of, or in cooperation with the home country’s competent authority.
    According to Article 42, para. 8, of the new 4th AML Directive Member States may require issuers of electronic money as defined by Directive 2009/110/EC and payment service providers as defined by Directive 2007/64/EC established on their territory in forms other than a branch, and whose head office is situated in another Member State, to appoint a central contact point in their territory to ensure on behalf of the appointing institution compliance with AML/CFT rules and to facilitate supervision by competent authorities, including by providing competent authorities with documents and information on request.
    According to Article 42, para. 9, of the new 4th AML Directive the ESAs shall develop draft regulatory technical standards on the criteria for determining the circumstances when the appointment of a central contact point pursuant to paragraph 8 is appropriate, and what the functions of the central contact points should be. The ESAs shall submit those draft regulatory technical standards to the Commission two years after the date of entry into force of the Directive. According to Article 42, para. 10, power is delegated to the Commission to adopt the regulatory technical standards referred to in paragraph 9 in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010.
    According to Article 45, para. 4, of the new 4th AML Directive Member States shall ensure that competent authorities of the Member State in which the obliged entity operates establishments supervise that these establishments respect the national provisions of that Member State pertaining to this Directive. In the case of the establishments referred to in Article 42(8), such supervision may include the taking of appropriate and proportionate measures to address serious failings that require immediate remedies. These measures shall be temporary and be terminated when the failings identified are addressed, including, with the assistance of or in cooperation with the home country’s competent authorities, in accordance with Article 42(1a) of this Directive.
    According to Article 45, para 5, of the new 4th AML Directive Member States shall ensure that the competent authorities of the Member State in which the obliged entity operates establishments shall cooperate with the competent authorities of the Member State in which the obliged entity has its head office, to ensure effective supervision of the requirements of this Directive.
    Also according new PDS 2, at Recital (31a), member States may decide to require that payment institutions operating on their territory under the right of establishment, and whose head office is situated in another Member State, appoint a central contact point in their territory, in order to facilitate the supervision of networks of agents and compliance with Title III and Title IV of this Directive. The EBA will develop draft regulatory standards setting out the criteria to determine when the appointment of a central contact point is appropriate and what its functions should be.
    In this sense, Article 26a, para. 5, 6 and 7, of new PSD 2, regarding supervision of payment institutions exercising the right of establishment and freedom to provide services, Member States may require payment institutions operating on their territory through agents under the right of establishment, and whose head office is situated in another Member State, to appoint a central contact point in their territory to ensure adequate communication and information reporting on compliance with Titles III and IV, without prejudice to any provisions on anti-money laundering and countering terrorist financing provisions and to facilitate supervision by home and host competent authorities, including by providing competent authorities with documents and information on request. EBA shall develop draft regulatory technical standards setting out criteria for determining the circumstances when the appointment of a central contact point pursuant to paragraph 5 above is appropriate, and what the functions of central contact points should be. EBA shall submit these draft regulatory technical standards to the Commission within one year of the date of entry into force of this Directive. Power is delegated to the Commission to adopt the regulatory technical standards referred to in paragraph 6 in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1093/2010.

    5. Some problems arising from the application of the new rules in EU Member States.

    From this new system of rules derive various problems related to the supervision of the money services agents.
    Now a first issue concerns how and whether Article 25, para. 3, of the PSD could be implemented in some uniform way so as to allow Home supervisors to delegate Anti Money Laundering/Countering Terrorist Financing (AML-CFT) inspections of PS agents work to Host supervisors.
    A second, but not secondary issue concerns which jurisdiction’s (home or host) AML-CFT law should apply when such delegated inspections took place.
    When will enter a regime the opportunity to request payment service providers as defined by Directive 2007/64/EC established on their territory in forms other than a branch, and whose head office is situated in another Member State, to appoint a central contact point in their territory to ensure on behalf of the appointing institution compliance with AML/CFT rules and to facilitate supervision by competent authorities, we will run the serious risk of an asymmetric supervision of agents.
    In my opinion, instead we would need … just to avoid reduced competition between the laws of the Member States in the implementation of the new EU Directives … as fast as possible harmonization of procedures for the supervision of payment institutions by agents.
    We need a common approach to the regulation of cross border PS agents within Europe at present, to counter the risk of violation domestic law and distortion of competition within a local market because of uncontrolled AML/CFT measures by using a huge network of agents. We need a ‘standardised’ and uniform approach, so as to consider the justified interests of the PS industry to get predictable regulatory conditions.


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    VAN DEN BROEK M., "The EU’s preventive AML/CFT policy: asymmetrical harmonization", in Journal of Money Laundering Control, 2011, Vol. 14, 2, 170
    BUISMAN S., "The Influence of the European Legislator on the National Criminal Law of Member States: It is All in the Combination Chosen", in Utrecht Law Review, 2011, Vol. 7, No. 3
    COSTA S.," Implementing the New Anti-Money Laundering Directive in Europe: Legal and Enforcement Issues - The Italian Case", Paolo Baffi Centre Research Paper No. 2008-13, 2013
    FRATANGELO P., International anti-money laundering policies and the protection of financial integrity, in R. Miccù - D. Siclari (ed.), Advanced Law for Economics. Selected Essays, Turin, Giappichelli, 2014
    FRATANGELO P., Prevention and Countering of Money Laundering and Terrorism Financing, in D. Siclari (ed.), Italian Banking and Financial Law. I. Supervisory Authorities and Supervision, Palgrave Macmillan, 2015
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    Editor: Domenico SICLARI




    In economics, the word ‘expectations’ refers to the forecasts or views of agents about the future trend of relevant variables based on information or intuitions. In macroeconomic contexts, the importance of expectations was emphasised firstly by Keynes1, who stressed the central role of expectations in the determination of agents' behaviour. However, he did not have an explicit model of how expectations are formed, suggesting that agents often rely on the so-called “animal spirits”.
    Starting from the 1940s, the first theories of expectations in economics were:
    i) the theory of extrapolative expectations. In the 1940s, Metzler2 suggested that the expected value of a variable at time t depends on its value at t-1 and on a certain correction parameter , taking into account the dynamic of the variable between t-2 and t-1:
    This theory would be able to explain a certain viscosity of the variables' trend as a reaction to economic changes.
    ii) the theory of adaptive expectations. In the 1950s, Nerlove3 formulated the theory of adaptive expectations, based on the assumption that the expected value of a variable at t depends on its expected values at t-1 and on the correction parameter , taking into account the difference between the “real” value and the expected value of the variable at t-1.
    A simple model of this theory is represented by the equation (2) where is the expected value of the variable at t; is the expected value at t-1 and is the effective value of the variable at t-1.
    With being the correction parameter that ranges between 0 and 1. The theory of adaptive expectations can be extended to periods.
    See the equation (3):
    where is the actualised value of the variable forperiods in the past. Thus, the current expectations are a weighted average of the past values of the variable with decreasing weights going back to the past.
    Both the extrapolative expectation and the adaptive expectation theories are based on distributed lag (DL) models. These two theories have three main shortcomings: i) they use ad hoc hypotheses; ii) they do not make an optimal use of the available information set; iii) they assume that people make systematic errors when predicting the future.
    In 1961, in order to override these limitations, Muth4 introduced a new theory of expectations based on the assumption that the agents, being rational, make an optimal use of all the available information: the theory of Rational Expectations (RE). In his theory, Muth states that: i) the expectations formulated by rational informed agents have to be derived from the economic theory; ii) the economic agents make an optimal use of the scarce and costly information; iii) the expectations’ model is endogenous with respect to the economic system.
    In particular, the subjective forecast of any agent is the mean of the expected value of the variable conditioned to the available information set. On average, agents can correctly predict the future trend of economic variables.
    In fact:
    where E is the conditional mean and the information set available at t-1. Thus the theory assumes that agents do not make systematic errors when predicting the future, and deviations from the perfect foresight are only random. The forecasting error is a stochastic variable with mean equal to zero and no serial autocorrelation. That is:

    If were not a stochastic variable the assumption of optimal use of the available information set would not be correct. A systematic error would imply the suboptimal use of the information set to formulate the expectations.
    The RE hypothesis has been used to support some radical conclusions about economic policymaking by Thomas Sargent, Neil Wallace5 and R. Lucas6, the major “neoclassical” economists. They assume that in efficient markets with perfect or near perfect information the agents will anticipate the Government's policies, and will adjust their response accordingly. If the Government employed monetary expansion in order to increase output, agents would foresee the effects, and wage and price expectations would be revised upwards accordingly (“self fulfilling expectations”). Only stochastic shocks to the economy can cause deviations in real variables from their natural level, making the economic policy ineffective.
    The hypothesis of RE is often criticised as an unrealistic model of how expectations are formed. Firstly, truly rational expectations would take into account the fact that information about the future is costly. The “optimal forecast” may be the best not because it is accurate, but because it is too expensive to get closer to accuracy. Furthermore, the fundamental uncertainty about future implies that the future cannot be predicted, so that no expectations can be truly “rational”. Lastly, the empirical literature on RE does not reach unique results.
    Moreover, the announced policies with no impact on the real side of the economy have consequences on the monetary side. A discretional economic policy can determine an increase in the price level. Under the RE hypothesis, in the short term, an announced policy has the same impact on the economy as the one described by monetarists in the long term. Two others main objections to the RE hypothesis (REH) come from the bounded rationality literature. Firstly, it may be a very strong assumption that agents know the true stochastic process of the variables they need to forecast. Alternatively, one could allow agents to form expectations from less sophisticated schemes as in Evans and Honkapohja (2001), and Hommes and Sorger (1998). Another objection to the REH is that in an environment with heterogeneous expectations, economic outcomes depend upon the expectations of all the participants. Heterogeneous expectations may alter the stochastic process of aggregate variables. Thus, if agents with rational expectations know the form of this stochastic process, then they must be able to observe the expectations of all agents in the economy. The learning literature has also discussed expectation formation schemes with heterogeneity7. Furthermore, Adam (2005) and Guse (2005) have presented models of heterogeneous expectations where each agent uses one of the several available forecasting models to form expectations of a stochastic process. In this literature, one limitation is the restrictive assumption that the proportion of agents using each forecasting model is determined exogenously. A possible solution is to include a predictor choice in these types of learning models that would remove the possibility of agents continually using inefficient forecasting models. The predictor choice literature has focused mainly on deterministic models and not stochastic models of learning. A reason for this hole in the literature is that prior to Adam (2005) and Guse (2005) there were no learning models studied with multiple available forecasting models. In conclusion, it is worth to underline that several recent papers in macroeconomics and finance have used information theoretic ideas8 to develop models with expectations. While these papers develop some valuable insights concerning the expectations of individuals, it is worth noting that they have made assumptions, to allow tractable modelling, that are hard to defend and can lead to anomalous results9.
    1Keynes, John Maynard (1936)
    2Metzler, L. A. (1941)
    3M. Nerlove (1958)
    4Muth, J. (1961).
    5Sargent, Thomas J. and Neil Wallace (1981).
    6Lucas R. (1972, 1976)
    7Evans, Honkapohja, and Marimon (2001), Honkapohja and Mitra (2006).
    8See, for example, Mackowiak and Wiederholt, 2005; Mondria, 2005.
    9For a discussion on this topic, see Sims (2005).


    Evans, G. W. and S. Honkapohja (2001), Learning and Expectations in Macroeconomics Princeton University Press.
    Friedman, M., (1968) The Role of Monetary Policy American Economic Review 58, 117.
    Guse, E., (2005). "Learning with Heterogeneous Expectations in an Evolutionary World," Cambridge Working Papers in Economics 0547, Faculty of Economics, University of Cambridge.
    Hommes, C. and Sorger, G. (1998). "Consistent Expectations Equilibria," Macroeconomic Dynamics, Cambridge University Press, vol. 2(03), pages 287-321, September
    Keynes, J. M. (2007) [1936]. The General Theory of Employment, Interest and Money. Basingstoke, Hampshire: Palgrave Macmillan.
    Klaus A., (2005). "Learning To Forecast And Cyclical Behavior Of Output And Inflation," Macroeconomic Dynamics, Cambridge University Press, vol. 9(01), pages 1-27, February.
    Lucas, R. E., Jr. (1972). “Expectations and the Neutrality of Money.” Journal of Economic Theory, 4: 103-l 24
    Lucas, R. E., Jr. (1976). “Econometric Policy Evaluation: A Critique.” Carnegie- Rochester Conference Series, 1: 19-46.
    Metzler, L. A. (1941). The Nature and Stability of Inventory Cycles. Reviewof Economics and Statistics 23 (3), 113…129.
    Mondria, J. (2006). "Financial Contagion and Attention Allocation," Working Papers tecipa-254, University of Toronto, Department of Economics
    Muth, J. (1961), “Rational expectations and the theory of price movements”, Econometria.
    Nerlove, M. (1958), 'Adaptive Expectations and Cobweb Phenomena', Quarterly Journal of Economics, vol. lxxii, 227-40
    Sargent, T. J. and N. Wallace (1981). "Some Unpleasant Monetarist Arithmetic". Federal Reserve Bank of Minneapolis Quarterly Review 5 (3): 1…17
    Honkapohja, S. and K. Mitra, (2006). "Learning Stability in Economies with Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(2), pages 284-309,
    Wiederholt, M. and B. Mackowiak, (2005). "Optimal Sticky Prices under Rational Inattention," 2005 Meeting Papers 369, Society for Economic Dynamics.
    Sims, C. A., (2005). "Rational inattention: a research agenda," Discussion Paper Series 1: Economic Studies 2005,34, Deutsche Bundesbank, Research Centre.

    Editor: Roberta DE SANTIS
    © 2010 ASSONEBB


    A country outside the European Union.

    ©2012 Editor: House of Lords


    Thrifts are specialised depository institutions in the United States. Depository institutions comprise all financial intermediaries that accept deposits and offer medium-term loans, especially in the real estate sector. They include Saving & Loan Associations (S&Ls), Mutual Savings Banks, and Credit Unions. Traditionally, S&Ls accept deposits and make loans for house construction, house purchase, house improvement or refinancing. Most S&Ls are non-profit societies jointly owned by depositors in exchange for proportionate returns. Although by law S&Ls are not banks, in recent times the distinction between banks and S&Ls has almost totally disappeared and they are often considered as a part of the banking sector. In the UK, building societies are similar organisations. Mutual Savings Banks, like S&Ls, accept small deposits and typically offer a residential mortgage. They are owned by stockholders or by depositors. The asset and liability structure of Mutual Savings Banks and S&Ls are similar. Finally, Credit Unions are small cooperative lending institutions that have a "common bond requirement" for members, that is to say, for instance, that membership is granted to union members or employees of a particular firm, and there are not stockholders in credit unions. They are the most recent category of thrift and the only one that fully benefits of tax exemption. Although they can be chartered by the state or by the federal government, most Credit Unions are regulated by the National Credit Union Administration at federal level. Typically, these intermediaries have a small dimension serving only their members’ deposits (called shares) and borrowing needs.
    Mishkin Frederic S. (2010), Economics of Money, Banking, and Financial Markets, Business School Edition (2nd Edition), Pearson Education Inc.
    Fabozzi F., Modigliani F., Jones F. (2010), Foundation of Financial Markets and Institutions, Pearson International Edition.

    Editor: Bianca GIANNINI
    © 2010 ASSONEBB


    The Basel Committee classifies bank capital identifying 3 different levels: Tier 1 capital, Tier 2 capital, and Tier 3 capital. They are characterised by increasing degree of liquidity and decreasing degree of redemption priority and ensure the coverage of financial losses, i.e., the bank survival. Tier 1 capital identifies the main components of equity capital: shares, unavailable balance sheet reserves, and shareholders’ retained earnings, accrued over the life of the bank. It represents the amount of capital that allows a bank to absorb losses without affecting interests of depositors. The Tier 1, compared to Tier 2 and to Tier 3, is the highest-quality component capital because it guarantees the depositors from any negative circumstances in which the bank could incur (occasional or persistent losses over time; "bankruptcy" with a subsequent liquidation of the bank capital).

    The Tier 1 Capital goes beyond the notion of accounting equity. Rather, it tends to approach the notion of net present value, at a given instant in time, of all the cash flows that the bank will be able to generate over the years. Thus, it is a measure of cash flows and not of net accounting profit, since it is used to monitor the solvency rather than profitability, of bank capital. In this sense, Tier 1 Capital identifies what would be the fair value of the bank (i.e., equilibrium price) once deducted the net present value of its third parties debt from the amount of RISK-WEIGHTED ASSETS (RWA). To this purpose, in fact, the calculation of Tier 1 Capital does not consider certain items that frequently increase the book value of the bank. These are, for example, the amount of intangible assets, the current year losses, or the company own shares held in the portfolio. Tier 1 Capital can also include hybrid capital instruments, represented by all those irredeemable liabilities, similar to the equity component, for which the issuer may suspend reimbursement to the holders subject to the approval of the central bank. This may occur when there exist special negative circumstances which could seriously compromise the bank solvency. For example, they might apply: When the balance sheet losses result in a reduction of the capital and reserves that do fall below the minimum level of capital required to run the bank activity. In this case, amounts arising from such liabilities as well as related interests may be used to cover losses and guarantee the bank survival. When economic results show a very negative trend, the creditors’ reimbursement right may be suspended to the extent needed to prevent or minimize the rise of losses. When the bank is placed in liquidation, debts can be repaid only after other creditors, not equally subordinated, have been satisfied. Generally, the hybrid capital instruments included into the Tier 1 Capital, must have a duration equal to, or higher than, 10 years. The Tier 1 Capital is regulated in order to assess the solvency of the Bank, through the calculation of the Core Tier 1 ratio. The calculation is relatively simple: it is necessary to relate the Core Tier 1 (with a maximum amount of hybrid capital lower than 15%) to risk-weighted assets (RWA) according to the criteria of Basel III). In other terms, this ratio evaluates the degree of bank capitalization relative to its assets, and in the light of the risk generated by the bank activity. An optimal level of Tier 1 capital ratio should be equal to 8%, while according to Basel II it should be at least 6%. Banks that do not meet this level are often called to recapitalize with the aim of re-establishing a balance between financial sources and uses and ensure the stability of the bank over time.

    Editor: Melania MICHETTI


    Tracking error volatility measures the volatility of the difference between the performance of a fund and the performance of its benchmark. The more a fund manager has attempted to beat his/her benchmark of reference by overweighing/underweighing selected stocks, the greater this difference will be (both negatively and positively). A high TEV value indicates an actively managed fund (in other words, the fund manager has attempted to beat the benchmark and not simply to replicate it); on the other hand, a low TEV value indicates a passively managed fund.

    Editor: Mirko IORI
    © 2009 ASSONEBB


    Transactions in financial instruments.

    ©2012 Editor: House of Lords

  • Trade Related Aspects of Intellectual Property Rights’ TRIPS

    The Trade Related Aspects of Intellectual Property Rights’ (TRIPS) Agreement, signed in 1994, is a founding element of the WTO. TRIPS constitutes the most important attempt to establish a global harmonisation of Intellectual Property (IP) protection and enforcement, creating international standards for the protection of patents, copyrights, trademarks and design. It sets down minimum standards for many forms of Intellectual Property (IP) regulation as applied to nationals of other WTO Members. The TRIPS agreement introduced Intellectual Property law into the international trading system for the first time and remains the most comprehensive international agreement on Intellectual Property to date. It also provides a dispute settlement schema and establishes enforcement procedures at the intergovernmental level.

    TRIPS was negotiated at the end of the Uruguay Round of the General Agreement on Trade and Tariffs (GATT) in 1994. After the Uruguay round, the GATT became the basis for the establishment of the World Trade Organization. Because ratification of TRIPS is a compulsory requirement of World Trade Organization membership, any country seeking to obtain easy access to the numerous international markets opened by the World Trade Organization must enact the strict Intellectual Property laws mandated by TRIPS. That is the reason why TRIPS is the most important multilateral instrument for the globalization of Intellectual Property laws.

    Areas Covered
    The agreement covers five broad issues:
    - how basic principles of the trading system and other international Intellectual Property agreements should be applied
    - how to give adequate protection to Intellectual Property Rights
    - how countries should enforce those rights adequately in their own territories
    - how to settle disputes on Intellectual Property between members of the WTO
    - special transitional arrangements during the period when the new system is being introduced.

    Basic principles
    The starting point of the Intellectual Property agreement is basic principles. And among these principles “non-discrimination” features prominently: national treatment (treating one’s own nationals and foreigners equally), and most-favoured-nation treatment (equal treatment for nationals of all trading partners in the WTO). National treatment is also a key principle in other Intellectual Property agreements outside the WTO.
    The TRIPS Agreement has an additional important principle: Intellectual Property protection should contribute to technical innovation and the transfer of technology. Both producers and users should benefit, and economic and social welfare should be enhanced, the agreement says.

    How to protect Intellectual Property: common ground-rules
    The second part of the TRIPS agreement looks at different kinds of Intellectual Property Rights and how to protect them. The purpose is to ensure that adequate standards of protection exist in all member countries. Here the starting point is the obligations of the main international agreements of the World Intellectual Property Organization (WIPO) that already existed before the WTO was created:
    - the Paris Convention for the Protection of Industrial Property (patents, industrial designs, etc)
    - the Berne Convention for the Protection of Literary and Artistic Works (copyright).
    In some cases, the standards of protection prescribed were thought inadequate. So the TRIPS agreement adds a significant number of new or higher standards.

    TRIPS requires member states to provide strong protection for Intellectual Property Rights. For example, under TRIPS:
    - Copyright terms must extend at least 50 years, unless based on the life of the author.
    - Copyright must be granted automatically, as specified in the Berne Convention.
    - Computer programs must be regarded as "literary works" under copyright law and receive the same terms of protection.
    - National exceptions to copyright are constrained by the Berne three-step test.
    - Patents must be granted for "inventions" in all "fields of technology" provided they meet all other patentability requirements (although exceptions for certain public interests are allowed) and must be enforceable for at least 20 years.
    - Exceptions to exclusive rights must be limited, provided that a normal exploitation of the work and normal exploitation of the patent is not in conflict.
    - No unreasonable prejudice to the legitimate interests of the right holders of computer programs and patents is allowed.
    - Legitimate interests of third parties have to be taken into account by patent rights .
    - In each state, Intellectual Property laws may not offer any benefits to local citizens which are not available to citizens of other TRIPS signatories under the principle of national treatment (with certain limited exceptions, TRIPS also has a most favored nation clause.

    Having Intellectual Property laws is not enough. They have to be enforced. This is covered in the third part of TRIPS. The agreement says governments have to ensure that Intellectual Property Rights can be enforced under their laws, and that the penalties for infringement are tough enough to deter further violations. The procedures must be fair and equitable, and not unnecessarily complicated or costly. They should not entail unreasonable time-limits or unwarranted delays. People involved should be able to ask a court to review an administrative decision or to appeal a lower court’s ruling.
    The agreement describes in some detail how enforcement should be handled, including rules for obtaining evidence, provisional measures, injunctions, damages and other penalties:
    - courts should have the right, under certain conditions, to order the disposal or destruction of pirated or counterfeit goods.
    - Wilful trademark counterfeiting or copyright piracy on a commercial scale should be criminal offences.
    - Governments should make sure that Intellectual Property Rights owners can receive the assistance of customs authorities to prevent imports of counterfeit and pirated goods.

    Dispute Resolution
    The dispute resolution mechanism is considered one of the most important results of the Uruguay Round. GATT had already prepared a special procedure for the settlement of trade disputes among members, but it is not equipped nor a scan time nor precise rules, so its effectiveness has been very poor. Not surprisingly, as early as 1966 the need to fill gaps arouse. That is because a first revision of the mechanism started. It paved the way for subsequent and further modifications, until the end of the round and the signature, in 1994, of the Agreement on Rules and Procedures Governing the Settlement of Disputes of the WTO, well known as the acronym Dsu - Dispute Settlement Understanding.
    The objective of the dispute settlement mechanism is ensuring certainty and predictability to the multilateral trading system. This mechanism applies to all disputes arising under the agreements ratified in the WTO and therefore also those related to Intellectual Property. The situations according to which a member can use the dispute resolution mechanism are decided, even today, by the GATT Agreement (articles 22 and 23). In particular, Article 23, paragraph 1, states that a State is authorized to act if the benefits coming directly or indirectly from the agreement have been nullified or injured by the conduct of another country. The WTO has maintained this setting and, therefore, has two main types of disputes:
    - The first type of dispute, and also the most common, is the claim due to the breach of the obligations ("violation complaint"), which provokes the annulment of a benefit or the damage of a Member state;
    - The second type of claim is called a "non-violation complaint" and can relate to any measure applied by another member state, even if not in conflict with the agreements. It must lead to a cancellation of benefits or a damage to another country. This type of dispute has been planned since no agreement can be considered to be devoid of weaknesses and it is possible that the benefits from joining the WTO may also be affected by measures consistent with it. Although the WTO is equipped with a structured mechanism for solving disputes, it is supposed to be invoked only where it is not possible to identify a mutually agreed solution between the parties. However, once the procedure for the award started, it is always possible and recommended to find an agreement in order to satisfy the claimers in full compliance with the "covered agreements". The dispute resolution mechanism is based on the interaction of three separate bodies: the Dispute Settlement Body, known as DSB - Dispute Settlement Body, the panel of experts appointed by the DSB, the Appellate Body, known as Ab.
    The DSU establishes the DSB, composed of the representatives of all WTO member states. It has the responsibility to administer the rules relating to the management of disputes. It is a political body that decides unanimously. In fact, in most cases, the opposition of a part is not able to prevent the adoption of decisions, since the rule applied is the negative consensus rule that is one of the major innovations introduced by the Uruguay Round. According to this rule is necessary that all WTO members oppose a decision in order to prevent its adoption. Such a situation is clearly unrealistic and that is why we often use the term "half- automaticity" with regard to DSB decisions, in contrast to what happened in the GATT.
    The panel is a collegial body composed of three - exceptionally, at the request of the parties, five - persons appointed by the DSB on the proposal of the General Secretariat. They are chosen among candidates who stand out for their experience and expertise in the field of international trade law and which can ensure completely independence from the governments of the WTO member states involved in the dispute. Once placed, the panel shall establish a work schedule which usually includes two successive written positions exchanges between the parties involved, interspersed by two hearings, during which stakeholders express their positions and respond to questions from the panel. Third parties may submit written documents and take part in the first of two hearings.
    The Appellate Body, unlike the panel, is a permanent collegial body, composed of seven members in office for four years; they may be re-elected only once.
    The dispute settlement process can be analysed by identifying three successive stages: consultations between the parties, panel’s decision and, possibly, Appellate Body’s decision and, finally, the implementation of decisions, which may include the adoption of countermeasures in case of non-fulfilment. The first step begins with a formal request to initiate consultations coming from the State intended to lodge a complaint. The “Consultations”, along with the "Good Offices", the "Conciliation" and "Mediation", represent a form of non-judicial or diplomatic resolution of disputes. They allow the parties to clarify the facts and possible misunderstandings in relation to the issue raised. Third parties not directly involved in the consultations, may apply to take part if they prove to have a substantial trade interest in respect of the issue discussed. If, within 60 days (30 in cases of urgency, including those involving perishable goods) from the receipt of the request for consultations is not possible to find an agreement between the parties, the State which initiated the procedure, may request the establishment of a panel, passing to the second stage of the proceedings, also known as the "Award." The formulation of such a request is crucial as it defines the content and extent of the panel jurisdiction and explains the procedure legal basis. In fact, only the measures identified in the request will be part of the panel’s investigation and will be subject to its pronunciation. Then the panel, possibly after consulting experts about the dispute subject, develop an interim report that already contains important information on its orientation on the dispute. This document may be further revised at the request of the parties and it is a prelude to the final report, (panel report) including a descriptive section and other sections relating findings, observations and recommendations. The panel report becomes binding only after being adopted by WTO Dispute Settlement Body within 60 days from its submission to WTO members. As mentioned above, the decision is taken almost automatically, because its rejection would require the consent of all members. However, if one or both parties start the appeal procedure, the adoption of the report is suspended until the Appellate Body has ruled, according to a procedure similar to panel’s ones. Once the DSB adopted the panel report or the Ab report, their decisions become binding. If a delegation intends to block the adoption process of an act is required to formally oppose the DSB meeting, although this is not always enough. In fact, the DSB is obliged to adopt the panel report or the Ab decisions, unless there is a general consensus not to proceed (negative consensus).
    The losing party is required to comply immediately or, if this is not possible, within a "reasonable period of time". If, after that period, the member state fails in fully complying with the requirements, you can open the appropriate negotiations to find a mutually agreed solution. That is non about payments but about concessions - such as a tariff reduction, equivalent to the damage suffered, according to the international agreements. If, within 20 days of the expiry of the "reasonable period of time", the parties have not agreed on a satisfactory compensation, the member state injured may claim the DSB to authorize specific trade sanctions. They are retaliatory measures, the most serious consequence coming from the failure to the demands adaptation and involving the temporary suspension of obligations under the covered agreements. The level of sanctions imposed must correspond to the level of damage suffered by the member state in question. If the parties are unable to agree on such matters an arbitrator may be required to decide the matter with the obligation for the parties to accept his decision.

    Transition arrangements
    When the WTO agreements took effect on 1 January 1995, developed countries were given one year to ensure that their laws and practices conform with the TRIPS agreement. Developing countries and (under certain conditions) transition economies were given five years, until 2000. Least-developed countries had 11 years, until 2006 - now extended to 2013 in general, and to 2016 for pharmaceutical patents and undisclosed information. If a developing country did not provide product patent protection in a particular area of technology when the TRIPS Agreement became applicable to it (1 January 2000), it had up to five additional years to introduce the protection. But for pharmaceutical and agricultural chemical products, the country had to accept the filing of patent applications from the beginning of the transitional period (i.e. 1 January 1995), though the patent did not need to be granted until the end of this period. If the government allowed the relevant pharmaceutical or agricultural chemical to be marketed during the transition period, it had to - subject to certain conditions - provide an exclusive marketing right for the product for five years, or until a product patent was granted, whichever was shorter.
    Subject to certain exceptions, the general rule is that obligations in the agreement apply to Intellectual Property Rights that existed at the end of a country’s transition period as well as to new ones.

    Scope of protection
    Specifically, TRIPS requires WTO members to provide copyright rights, covering content producers including performers, producers of sound recordings and broadcasting organizations; geographical indications, including appellations of origin; industrial designs; integrated circuit layout design protection; patents; new plant varieties; trademarks; trade dress; and undisclosed or confidential information.

    The TRIPS agreement ensures that computer programs will be protected as literary works under the Berne Convention and outlines how databases should be protected.
    It also expands international copyright rules to cover rental rights. Authors of computer programs and producers of sound recordings must have the right to prohibit the commercial rental of their works to the public. A similar exclusive right applies to films where commercial rental has led to widespread copying, affecting copyright-owners’ potential earnings from their films.
    The agreement says performers must also have the right to prevent unauthorized recording, reproduction and broadcast of live performances (bootlegging) for no less than 50 years. Producers of sound recordings must have the right to prevent the unauthorized reproduction of recordings for a period of 50 years.

    The agreement defines what types of signs must be eligible for protection as trademarks, and what the minimum rights conferred on their owners must be. It says that service marks must be protected in the same way as trademarks used for goods. Marks that have become well-known in a particular country enjoy additional protection.

    Geographical indications
    A place name is sometimes used to identify a product. This “geographical indication” does not only say where the product was made. More importantly, it identifies the product’s special characteristics, which are the result of the product’s origins.
    Well-known examples include “Champagne”, “Scotch”, “Tequila”, and “Roquefort” cheese. Wine and spirits makers are particularly concerned about the use of place-names to identify products, and the TRIPS Agreement contains special provisions for these products. But the issue is also important for other types of goods.
    Using the place name when the product was made elsewhere or when it does not have the usual characteristics can mislead consumers, and it can lead to unfair competition. The TRIPS Agreement says countries have to prevent this misuse of place names. For wines and spirits, the agreement provides higher levels of protection, i.e. even where there is no danger of the public being misled.
    Some exceptions are allowed, for example if the name is already protected as a trademark or if it has become a generic term. For example, “Cheddar” now refers to a particular type of cheese not necessarily made in Cheddar, in the UK. But any country wanting to make an exception for these reasons must be willing to negotiate with the country which wants to protect the geographical indication in question.

    Industrial Design
    Under the TRIPS Agreement, industrial designs must be protected for at least 10 years. Owners of protected designs must be able to prevent the manufacture, sale or importation of articles bearing or embodying a design which is a copy of the protected design.

    The agreement says patent protection must be available for inventions for at least 20 years. Patent protection must be available for both products and processes, in almost all fields of technology. Governments can refuse to issue a patent for an invention if its commercial exploitation is prohibited for reasons of public order or morality. They can also exclude diagnostic, therapeutic and surgical methods, plants and animals (other than microorganisms), and biological processes for the production of plants or animals (other than microbiological processes).
    Plant varieties, however, must be protectable by patents or by a special system (such as the breeder’s rights provided in the conventions of UPOV - the International Union for the Protection of New Varieties of Plants).
    The agreement describes the minimum rights that a patent owner must enjoy. But it also allows certain exceptions. A patent owner could abuse his rights, for example by failing to supply the product on the market. To deal with that possibility, the agreement says governments can issue “compulsory licences”, allowing a competitor to produce the product or use the process under licence. But this can only be done under certain conditions aimed at safeguarding the legitimate interests of the patent-holder.
    If a patent is issued for a production process, then the rights must extend to the product directly obtained from the process. Under certain conditions alleged infringers may be ordered by a court to prove that they have not used the patented process.
    An issue that has arisen recently is how to ensure patent protection for pharmaceutical products does not prevent people in poor countries from having access to medicines - while at the same time maintaining the patent system’s role in providing incentives for research and development into new medicines. Flexibilities such as compulsory licensing are written into the TRIPS Agreement, but some governments were unsure of how these would be interpreted, and how far their right to use them would be respected.
    A large part of this was settled when WTO ministers issued a special declaration at the Doha Ministerial Conference in November 2001. They agreed that the TRIPS Agreement does not and should not prevent members from taking measures to protect public health. They underscored countries’ ability to use the flexibilities that are built into the TRIPS Agreement. And they agreed to extend exemptions on pharmaceutical patent protection for least-developed countries until 2016.

    Integrated circuit layout design
    The basis for protecting integrated circuit designs (“topographies”) in the TRIPS agreement is the Washington Treaty on Intellectual Property in Respect of Integrated Circuits, which comes under the World Intellectual Property Organization. This was adopted in 1989 but has not yet entered into force. The TRIPS agreement adds a number of provisions: for example, protection must be available for at least 10 years.

    Since TRIPS came into force it has received a growing level of criticism from developing countries, academics, and non-governmental organizations. Some of this criticism is against the WTO as a whole, but many advocates of trade liberalization also regard TRIPS as bad policy. TRIPS's wealth redistribution effects (moving money from people in developing countries to copyright and patent owners in developed countries) and its imposition of artificial scarcity on the citizens of countries that would otherwise have had weaker Intellectual Property laws, are common bases for such criticisms.
    Daniele Archibugi and Andrea Filippetti argue that the importance of TRIPS in the process of generation and diffusion of knowledge and innovation has been overestimated by both their supporters and their detractors. Claude Henry and Joseph E. Stiglitz that the current Intellectual Property global regime may impede both innovation and dissemination, and suggest reforms to foster the global dissemination of innovation and sustainable development.

    Andersen B. (2004), If “Intellectual Property Right is the Answer” What is the Question? Revisiting the Patent Controversies, Economics of Innovation and New Technology, Vol.13, No.5.
    Archibugi, D., A. Filippetti (2010), “The Globalisation of Intellectual Property Rights”, Global Policy Discussion Paper, Vol.1, No.2, May. http://www.danielearchibugi.org/downloads/papers/IPRglobalization.pdf
    Chen, Y. and T. Puttitanum (2005), “Intellectual Property Rights and Innovation in Developing Countries”, Journal of Development Economics, Vol.78, No.2.
    De Filippis F., L. Salvatici (a cura di) (2003), “Wto e agricoltura prima e dopo la Conferenza di Cancun”, Quaderni del Forum Internazionale dell’Agricoltura e dell’Alimentazione, No.3.
    World Intellectual Property Organisation (2008), “WIPO Intellectual Property Handbook: Policy, Law and Use”, WIPO Publication, No. 489 http://www.wipo.int/about-ip/en/.



    The Transatlantic Trade and Investment Partnership (TTIP) or Transatlantic Free Trade Area (TAFTA) is a trade agreement that is presently being secret negotiated between the European Union and the United States. The negotiations were launched in July 2013 and the actors involved are the 50 states of the United States and the 28 nations of the European Union, for a total of about 820 million people, officially represented by the European Commission and the United States Trade Representative (USTR). The topics covered by the Treaty are: market access for agricultural and industrial products, public procurement, investment, tariffs and non-tariff barriers, services, intellectual property rights, sustainable development, small and medium enterprises, dispute settlement, the state-owned enterprises. Parallel to the TTIP agreements, proceed also similar agreements between the US and Pacific countries, known as the Trans Pacific Partnership (TTP).

    The topics: market access, regulatory issues, non-tariff barriers and global standards

    In the only official document released by the EU October 9, 2014 (Directives for the negotiation on the Transatlantic Trade and Investment Partnership between the European Union and the United States of America) the goal of TTIP is “The objective of the Agreement is to increase trade and investment between the EU and the US by realising the untapped potential of a truly transatlantic market place, generating new economic opportunities for the creation of jobs and growth through increased market access and greater regulatory compatibility and setting the path for global standards”. The questions covered in the document and by negotiators are many and not expect only the reduction of tariffs and customs duties (already relatively low and currently between 3-4%). The issues being negotiated concern, in particular, non-tariff barriers and the establishment of common standards and regulations for the protection of intellectual property, greater openness to foreign investment and incentives for participation in public procurement. The Agreement shall be composed of three key components: (a market access, (b regulatory issues and Non-Tariff Barriers (NTBs), and (c rules.

    a) Market Access

    Duties and other requirements regarding imports and exports

    The goal will be to eliminate all duties on bilateral trade, with the shared objective of achieving a substantial elimination of tariffs upon entry into force and a phasing out of all but the most sensitive tariffs in a short time frame. In the course of negotiations, both Parties will consider options for the treatment of the most sensitive products, including tariff rate quotas. All customs duties, taxes, fees, or charges on exports and quantitative restrictions or authorisation requirements on exports to the other Party which are not justified by exceptions under the Agreement shall be abolished upon the application of the Agreement. The negotiations shall address concerns regarding remaining obstacles to trade in dual use items that affect the integrity of the single market.

    Investment Protection

    The aim of negotiations on investment will be to negotiate investment liberalisation and protection provisions including areas of mixed competence, such as portfolio investment, property and expropriation aspects, on the basis of the highest levels of liberalisation and highest standards of protection that both Parties have negotiated to date.

    Public procurement

    The Agreement will aim at enhanced mutual access to public procurement markets at all administrative levels (national, regional and local), and in the fields of public utilities, covering relevant operations of undertakings operating in this field and ensuring treatment no less favourable than that accorded to locally established suppliers.

    b) Regulatory issue and non-tariff barriers

    The Agreement will aim at removing unnecessary obstacles to trade and investment, including existing NTBs, through effective and efficient mechanisms, by reaching an ambitious level of regulatory compatibility for goods and services, including through mutual recognition, harmonisation and through enhanced cooperation between regulators. Regulatory compatibility shall be without prejudice to the right to regulate in accordance with the level of health, safety, consumer, labour and environmental protection and cultural diversity that each side deems appropriate, or otherwise meeting legitimate regulatory objectives.

    c) Rules

    Intellectual Property Rights

    The Agreement shall cover issues related to intellectual property rights. The Agreement will reflect the high value placed by both Parties on intellectual property protection and build on the existing EU-US dialogue in this sphere.

    Trade and sustainable development

    The Agreement will include commitments by both Parties in terms of the labour and environmental aspects of trade and sustainable development. Consideration will be given to measures to facilitate and promote trade in environmentally friendly and low carbon goods, energy and resource-efficient goods, services and technologies, including through green public procurement and to support informed purchasing choices by consumers. The Agreement will include mechanisms to support the promotion of decent work through effective domestic implementation of International Labour Organisation (ILO) core labour standards.

    Customs and Trade facilitation

    The Agreement shall include provisions to facilitate trade between the Parties, while ensuring effective controls and anti-fraud measures. To this end it shall include inter alia commitments on rules, requirements, formalities and procedures of the Parties related to import, export and transit.

    Sectoral Trade Agreements

    The Agreement should, where appropriate, review, build on and complement existing sectoral trade agreements.

    Trade and Competition

    The Agreement should aim at including provisions on competition policy, including provisions on antitrust, mergers and state aids. Furthermore, the Agreement should address state monopolies, state owned enterprises and enterprises entrusted with special or exclusive rights.

    Trade related energy and raw materials

    Negotiations should aim at ensuring an open, transparent and predictable business environment in energy matters and at ensuring an unrestricted and sustainable access to raw materials.

    Small and Medium-Sized Enterprises

    The Agreement will include provisions addressing trade-related aspects of small and medium-sized enterprises.

    Capital Movement and Payments

    The Agreement will include provisions on the full liberalisation of current payments and capital movements, and include a standstill clause.

    Treaty approval process onEuropean level

    Usually the start of trade negotiations is preceded by months of preparation: consultations, evaluation of the potential effects of the agreement on economic operators and consumers in Europe, informal and formal meetings between the Commission and the country or region concerned to establish the issues of agreement. At the end of these general preparations, the Commission will request authorization to the Council of Ministers (composed by representatives of the EU governments) to start negotiations. The Council shares the goals that the Commission should try to achieve. During the negotiation process, which usually lasts several years, the Commission shall inform the Council and the European Parliament on progress. After reaching an agreement, the Council formally authorizes the signature.

    The European Parliament, thanks to the Lisbon Treaty, may accept or reject the text, but can not change it.
    It will therefore to the citizens representatives, to decide definitively if this result represents a valid solution for Europe and the United States.

    Potential benefits

    Independent research shows that TTIP could boost:

    • the EU's economy by €120 billion;
    • the US economy by €90 billion;
    • the rest of the world by €100 billion

    the european commission expected that every year an average European household would gain an extra €545 and our economy would be boosted by 0.5% to up to 1% of GDP. Moreover the elimination of tariffs would result in a lower price for the product traded by members of TTIP and to a purchase of larger quantities of the same. As an added effect we would have a higher level of production, purchases of capital goods and increased investment to meet the increased demand. This would have beneficial effects on employment and income.

    Objectionsto theTreaty

    The main objections to the Treaty concerning the following issues: a) food safety, for the possibility of free movement of GMOs; b) water, energy and utilities, for the possible privatization; c) finance and intellectual property, for the inability to control and disposition of property; d) freedom and democracy, for the possible failure of intervention of the regional governments and the non-controlling flows of personal data.

    Moreover, a further problem concerns the ISDS clause (mechanism for settlement of disputes between investors and state). The clause provides that if the rules, standards and regulations or European regulations were going to fight the interests of business investment, individual Member National could turn to courts of arbitration. The ISDS clause represents a set of rules designed to legislate on the conflicts between state and business, allowing the latter to bypass national courts, addressing the international courts.


    COMMISSIONE EUROPEA (2014) Le politiche dell’Unione Europea: commercio, Commissione europea Direzione generale della Comunicazione Pubblicazioni (http://europa.eu/pol/pdf/flipbook/it/trade_it.pdf)

    COMMISSIONE EUROPEA (2013) Partenariato transatlantico su commercio e investimenti. Parte normativa, Commissione europea Direzione generale della Comunicazione Pubblicazioni, Settembre (http://trade.ec.europa.eu/doclib/docs/2013/october/tradoc_151796.pdf)

    COMMISSIONE EUROPEA, Website (http://ec.europa.eu/trade/policy/in-focus/ttip/about-ttip/index_it.htm)

    CONSIGLIO DELL’UNIONE EUROPEA (2014) “Direttive di negoziato sul Partenariato transatlantico per gli scambi e gli investimenti tra l'Unione europea e gli Stati Uniti d'America”, ST 11103/13, Bruxelles, 9 ottobre (http://data.consilium.europa.eu/doc/document/ST-11103-2013-DCL-1/it/pdf)

    GEORGE MONBIOT (2013) This transatlantic trade deal is a full-frontal assault on democracy, The Guardian, 4 novembre (http://www.theguardian.com/commentisfree/2013/nov/04/us-trade-deal-full-frontal-assault-on-democracy)

    HOUSE OF LORDS GREAT BRITAIN (2013) The Transatlantic Trade and Investment Partnership, 14th Report of Session 2013-2014

    UNITED STATES MISSION TO EUROPEAN UNION, Website (http://useu.usmission.gov/ttip.html)

    Editor: Giovanni AVERSA



    The transmission mechanisms of monetary policy may be defined as the channels, not mutually exclusive, through which the evolution of monetary aggregates affect, often after variable and not completely predictable intervals, the level of product and prices.

    The economic literature has identified the existence of at least four different mechanisms through which monetary policy is able to influence the price level and the national income: the interest rate, the prices of financial assets, the domestic credit and the exchange rate (Mishkin, 1993). In the following paragraphs, we will analyse in detail the functioning of these mechanisms by examining the case of an expansionary monetary policy.

    The transmission mechanisms of monetary policy may be defined as the channels, not mutually exclusive, through which the evolution of monetary aggregates affect, often after variable and not completely predictable
    intervals, the level of product and prices.
    The economic literature has identified the existence of at least four different mechanisms through which monetary policy is able to influence the price level and the national income: the interest rate, the prices of financial assets, the domestic credit and the exchange rate (Mishkin, 1993). In the following paragraphs, we will analyse in detail the functioning of these mechanisms by examining the case of an expansionary monetary policy.

    Interest rate

    An expansionary monetary policy () causes a sudden reduction in official rates (), thus reducing the cost that each commercial bank faces to access the Central Bank’s facility. Under "normal" conditions, the interbank rate should move downward (), generating an expansion of lending to individual banks.
    These, in turn, will use this excess of liquidity by buying financial assets, and providing greater credit to the private sector. On the securities market, the increased demand exerts upward pressure on prices and determines a further reduction in nominal interest rates that, inflation expectations being equal, results in a reduction of the real interest rate (). All this helps the evolution of the domestic demand through the expansion of investment and consumption (). In symbols:

    The prices of financial assets

    As mentioned above, an expansionary monetary policy is able to exert strong upward pressure on prices of financial assets (), increasing the market value of firms in relation to the cost of capital (the so-called q of Tobin,) and positively influencing the value of securities wealth of households(). This should translate on the one side into an increase in investment by firms () and on the other side, assuming that household consumption depends positively on the stock of wealth, in an expansion of private consumption ().
    In symbols:

    The domestic credit

    This channel of transmission is strictly related to the assets of commercial banks and specifically to the financing granted to companies and to the securities portfolio. When determining the monetary policy changes in interest rates, commercial banks can find it profitable to reallocate part of their activities’ bearing.
    In particular, it has been clarified how the monetary expansion made by the Central Bank has made commercial banks more liquid, increasing their reserves (). Among the various methods through which the liquidity can be invested, one of the most important is the provision of credit to the private sector (). This is the mission of commercial banks, whose growth determines positive effects on business investment and on household consumption. In symbols:

    In literature, the mechanism of transmission of bank credit refers to the so-called credit view that relies on the effects of imperfections in the capital market.
    In particular, this branch of the economic research focuses on the determination of loans granted by banks, which are viewed as non-perfect substitutes of the direct financing to businesses.

    The exchange rate

    Monetary policy exerts a strong impact on the exchange rate. In particular, it was seen how increasing the amount of currency in circulation would result in a reduction in the nominal interest rate.
    This leads to a negative differential between the domestic and the foreign interest rates ( where indicates the foreign nominal interest rate), and … in the presence of perfect capital mobility and perfect substitutability of financial assets … a depreciation of the nominal exchange (, which indicates the units on the national currency to buy one unit of the foreign currency) due to the simultaneous growth in the demand for foreign currency and in the supply of domestic currency in the forex markets. Assuming constant both the foreign and the domestic price level (as it is reasonable to believe in the short term), the depreciation of the nominal exchange rate results in a subsequent real depreciation () that, under the so-called Marshall-Lerner conditions, exerts a positive influence on the balance of payments () and therefore on aggregate income. In symbols:

    It is worth noticing that, within each of the four transmission mechanisms presented, not a secondary role is played by the expectations on prices.
    In a context characterised by high uncertainty, operators make forecasts about the economic fundamentals considering the full range of information available. The expectations on prices and future rates affect the yield curve and may contribute to the growth of nominal variables, such as prices and rates. The more the Central Bank is able to influence the expectations of economic agents the more they can contribute to the stability of future prices.


    Balassa B., (1964), "The purchasing-power parity doctrine: A reappraisal", The Journal of Political Economy, Vol.72, pp. 584-596.
    Bergin P.R., and Feenstra, R.C., (2000), "Staggered price setting, translog preferences, and endogenous persistence", Journal of Monetary Economics, Vol. 45(3), pp 657-680.
    Canzoneri M.B. and Henderson D.W, (1991), Monetary Policy in Interdependent Economies: A Game-Theoretic Approach, MIT Press Books, The MIT Press.
    Christiano L.J., Eichenbaum M.S., and Evans C.L, (2001) "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," NBER working paper no. 8403, July 2001.
    Harrod R. (1939), International Economics, University of Chicago Press, Chicago.
    Mishkin F. (1995), "Symposium on the Monetary Transmission Mechanism", The Journal of Economic Perspective, Vol. 9, pp. 3-10.
    Rabin A.A. and Jeager L.B. (1997), "The Monetary Transmission Mechanism", The Eastern Economic Journal , Vol. 23 n.3, pp. 293-9.
    Samuelson P.A. (1964), "Theoretical notes on trade problems", The Review of Economics and Statistics, Vol. 46, pp.145-154.

    Editor: Lorenzo CARBONARI

    © 2009 ASSONEBB


    Treasury Bills, also called T-bills, are a type of securities issued by the U.S. Department of Treasury. Treasury Bills differ from Treasury notes and Treasury bonds for the shorter maturity, which is up to one year. Currently, the U.S. Department of Treasury issues securities with short maturity as discount securities: the interest corresponded is the difference between the purchase price and a contractually fixed amount paid at maturity (face value or maturity value). This implies that T- Bills are sold at a discount rate from face value (maturity value). Is possible to buy T-Bills in a treasury auction in two ways: by submitting a competitive bid, through a bank, broker, or dealer or by submitting a noncompetitive bid through a bank, broker, or dealer or through an account in Treasury Direct and Legacy Treasury Direct. In the first case, an investor can buy up to 35% of the initial offering amount, whereas in the latter it is possible to purchase up to $5 million. In the secondary market T- Bills are quoted on a bank discount basis:

    The yield is computed as follows:

    Y= annualised yield
    D= dollar discount (Face value … Price)
    F = face value
    t = number of days remaining to maturity

    Therefore, the price is computed by deriving the dollar discount and by computing the difference from the face value:

    The Discount Yield can be a misleading measure of the return on T-Bills because it is an annualised rate of return based on the par value of the bills rather than on the actual dollar amount invested, and it is calculated on a 360-day basis rather than on a 365-day basis (used for Treasury bonds and notes).
    Fabozzi F., Modigliani F., Jones F. (2010), Foundation of Financial Markets and Institutions, Pearson International Edition.
    Editor: Bianca GIANNINI
    © 2010 ASSONEBB


    Treasury notes, or T-notes, are a type of securities issued by the U.S. Department of Treasury. The maturity of T- Notes is between two and ten years and they are comprised in the category of coupon securities. Indeed, T-Notes, as it also occurs with Treasury bonds, pay interest every six months plus face value (maturity value) at maturity. The purchase price may be greater than, smaller than, or equal to the face value of the note. T-Notes are purchased in two ways: by submitting a competitive bid, through a bank, broker, or dealer, or by submitting a non-competitive bid through a bank, broker, or dealer, or alternatively through an account in Treasury Direct and Legacy Treasury Direct. In particular, it is possible to use the latter financial services website, created by the U.S. Department of the Treasury Bureau of the Public Debt, because all treasuries are now issued and held electronically. In case of competitive bidding, an investor can buy up to 35% of the initial offering amount (to guarantee a sufficient level of competition in the secondary market), while for non-competitive bidding, there is a limit on the purchase of $5 million. Investors are also allowed to sell T-Notes before maturity. In the primary market, the yield of a T-Note is determined in an auction, and in the secondary market they are quoted on a price basis.

    Editor: Bianca GIANNINI
    © 2010 ASSONEBB

  • Trend

    It is the persistent and long-term flow of the time series considered. It can be increasing trend, decreasing trend or constant trend with fluctuation.


    Technical Analysis. The region between the trend line and the return line for a determined period of time, comprising the movements in stock prices for that period. The return line is parallel to the trend line. In ascending phases, the return line represents the resistance. Alternatively, in descending phases, the return line is the support. The trend channel allows to determine the future trend of prices. As long as prices remain within the channel, traders expect the overall trend not to change. The violation of the trend line is a signal of a reversal in the trend of prices, while a violation of the return line indicates the acceleration of the current behaviour of prices.

    Bianca GIANNINI
    © 2010 ASSONEB

  • Troubled Asset Relief Program (TARP)

    The TARP is an extraordinary program of the USA Federal Reserve to sustain liquidity of troubled banks, by temporary purchasing their low quality assets. It has been adopted by the US Congress after the financial crisis of 2008/09, and has been heavily criticised.

    The aim of the program was to "stabilize the U.S. financial system, restart economic growth, and prevent avoidable foreclosures".

    The US Treasury reports that in 2013 the TARP and non TARP programs have been financed with around $2.5 billion.


    An offer to buy or sell at specified prices. The ‘bid-offer’ spread is the difference between the two prices.

    ©2012 Editor: House of Lords

Selected letter: T English version

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