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Email news service March 2014: Relief extended on US derivative rules
Email news service: EU financial legislation hits delays
Email News Service February 2014: EU resolution mechanism talks go to the wire
Email News Service September 2013: Banks’ capital and liquidity improve under Basel III
Email News Service September 2013: Internal model differences outweigh others; Peer review sees good UK progress
Email News Service September 2013: G20 leaders seek to avoid conflicting financial rules
Email News Service September 2013: FSB’s Carney warns on regulatory fragmentation
Email News Service July/August 2013: US needs analytical approach to systemic risk
Email News Service July/August 2013: Regulators propose non-bank resolution regime
Email News Service July/August 2013: G20 names nine insurers as systemic risks; backstop capital planned
Email News Service July/August 2013: US regulators plan tougher capital rules for big banks
Email News Service July/August 2013: Reassessing Basel pillars could aid simplicity, say regulators
Email News Service July/August 2013: Latest study again shows up wide bank capital variations
Email News Service April 2013: EU-US banking spat increases fragmentation fears
Email News Service April 2013: Stability Board warns G20 on fragmentation
Email News service April 2013: G20 seen tasking Stability Board with Libor oversight
Email News Service February 2013: Simpler risk measures not necessarily a solution, says Basel’s Byres
Email News Service February 2013: Basel takes aim at bank VaR calculations; G20 monitoring impact of regulations on long-term finance
Email news service January 2013: Basel III delays not critical, but accord may not have right balance on risk measurement, Ingves says
Email News Service January 2013: Basel confirms easier bank liquidity rule
Email News Service January 2013: Basel regulators seen easing bank liquidity rule this weekend
Email news Service November 2012: Wall Street left to mend regulatory fences after backing loser
Email News Service December 2012: Task force looking further into Basel III complexity
Email News Service November 2013: BofE governor-to-be Carney to remain G20 financial stability chief
Email News Service November 2012: Four big banks face top G20 capital charges
Email News Service October 2012: Delay threatens G20 OTC reforms
Email News Service October 2012: urge G20 action to keep Basel III on track
Email News Service October 2012: EU banking supervision agreement raises big questions
Email News Service October 2012: G20 insurer systemic risk plans raise concern
Email News Service October 2012: Stability Board bolsters systemic rules for banks, insurers
Email News Service October 2012: Ring fencing EU banks will be huge task
Email News Service September 2012: Basel III test shows need for $485 billion more bank capital; European banks may face sliding scale of requirements
Email news Service September 2012: Basel regulators look at reducing complexity
Email News Service September 2012: Europe’s banking plan faces tough challenges
Email news Service Jul/Aug 2012: US extends Basel III comment period
Email News Service July/August 2012: EU’s Barnier says pensions not at risk with Solvency II; Industry knocks G20 systemic risk proposal
Email News Service July/August 2012: Dismay at US delay on global accounting rules
Email News Service June 2012: G20 agree strengthened role for Financial Stability Board
Email News Service June 2012: G20 summit to contend with regulatory issues as well as eurozone crisis
Email News Service June 2012: EU may see new bank supervision proposals by autumn; US regulators say Basel III not tough enough
Email News Service June 2012: Basel III bank rules could be weaker in US, EU and Japan
Email News Service June 2012: Regulators want to launch buyer/seller tagging next year
Email News Service June 2012: EU bank plans seen as major priority for regulators

US rejects global bank regulation

Markets are fragmenting, but the Fed says charges of Balkanisation levelled at the US are ‘curious’ given similar moves in the EU. Charles Piggott investigates.

US Federal Reserve governor Daniel Tarullo has rejected claims that a tough US regulatory response to the crisis is fragmenting global financial markets. He says charges of “Balkanisation” levelled at the US are “curious” given that “much of what the US is now doing is matching what the EU has quite sensibly been doing for years”.    More>>>

Policy-makers show signs of rethink on shadow banking

Several initiatives by policy-makers suggest attitudes to market-based finance are changing to accommodate the G-20’s growth agenda, writes Philip Alexander.

The industry has long argued that ‘shadow banking’ is a loaded term that evokes negative connotations, preferring the phrase ‘market-based finance’ to describe non-bank sources of credit. Clara Furse, external member of the Bank of England’s financial policy committee, seems to be listening, delivering a speech in late March entitled How market-based finance can support stability.   More>>>

Rethinking central counterparty clearing

The enlarged role for central clearing counterparties is forcing both regulators and industry participants to think about the risks posed by these new systemic entities, finds Michael Marray.

Regulators in the US, Europe and Asia are moving at varying speeds on central counterparty (CCP) clearing requirements for derivatives, with the US at least 12 months ahead. As CCPs handle growing amounts of activity, they are themselves coming under increased regulatory scrutiny as a potential source of risk.   More>>>

‘More work to do’ Tarullo tells big US banks

The biggest US banks ended up at the bottom of the pile in this year’s stress tests. Analysts say the message is political reports Charles Piggott.

Days after the US Federal Reserve published projections of how the nation’s 30 largest banks would perform under stress, Fed governor Daniel Tarullo appears in no mood to ease off. Regulators and large banks have plenty of work left to do to raise risk-management standards, he says.   More>>>

Basel banking book rules likely to focus on comparability

The industry is bracing for the possibility that Basel will ask banks to hold capital against interest rate risk on the banking book, writes Philip Alexander.

The Basel Committee on Banking Supervision (BCBS) task force on interest rate risk in the banking book is aiming to publish draft proposals for consultation during the second quarter of 2014. This would be a major new initiative in an area where there is currently little global consistency. The timing is also sensitive, because developed market interest rates look set to begin reversing a long-term downtrend.   More>>>

Reform bill aims to throw daylight on FSOC

High-ranking member of the US House Committee on Financial Services Scott Garrett has launched a bill to reform the US Financial Stability Oversight Council (FSOC). “Over the last two years, it has become increasingly apparent that the [FSOC], created by the Dodd-Frank Act, is in serious need of reform,” said the Republican congressman announcing the bill on April 3. “The council meets in secret, refuses to disclose substantive transcripts, and blocks any requests by other regulators or members of Congress for a more open and transparent process.”

Mr Garrett’s bill entitled The Financial Stability Oversight Council Transparency and Accountability Act would subject the FSOC to the Government in the Sunshine Act aimed at creating greater transparency; allow wider participation of US regulatory agencies; and allow congressional oversight committee members to attend FSOC meetings. Mr Garrett said it is unacceptable the way the FSOC has refused access to meetings.   More>>>

CFTC signs MOU with Canadian regulators

The CFTC’s acting chairman Mark Wetjen has signed a memorandum of understanding (MOU) with the Alberta Securities Commission, the British Columbia Securities Commission, the Ontario Securities Commission and the Autorité des Marchés Financiers, aimed at enhancing cross-border supervision of firms operating in both countries.

The April 3 MOU will promote the exchange of information between the regulators responsible for trading platforms, central counterparties, trade repositories, intermediaries, dealers and other market participants.    More>>>

Fed governor Jeremy Stein resigns

In a letter dated April 3, Federal Reserve governor Jeremy Stein has tendered his resignation to President Barack Obama. He will leave the Fed on May 28, 2014 to return to his previous teaching position at Harvard University’s economics department. Mr Stein, who joined the Fed in 2012 on loan from Harvard University, needed to return within two years to keep his professorship.

Mr Stein is regarded as an expert on the interplay between monetary and regulatory policy, and although he leaves on good terms he recently raised concerns that an “accommodative” monetary policy could increase risks of adverse financial market outcomes.   More>>>

Hopes raised US regulators will adopt Basel definition of leverage ratio

Leaks have emerged that the Fed, Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation are preparing to accept international standards for measuring leverage finalised by the Basel Committee on Banking Supervision (BCBS) in January.

Soon after US regulators announced that open board meetings had been set for April 8, leaks emerged that they plan to adopt the BCBS’s methodology for calculating how banks’ total exposure is measured. However, it is still expected that US banks will be required to maintain leverage ratios higher than the 3% proposed by the BCBS.   More>>>

Industry groups urge SEC to start again on asset-level ABS data dissemination

The Securities Industry and Financial Markets Association (SIFMA) and the Financial Services Roundtable have called for the US Securities and Exchange Commission (SEC) to re-propose rules that would require issuers of asset-backed securities to disclose asset-level data.

“We urge the Commission to abandon the flawed approach to the disclosure of asset-level information” the industry bodies said in a written statement arguing that this would expose both consumers and issuers to unwarranted risks and liabilities. “The Commission should re-propose the ABS Releases in order to accommodate a more detailed and comprehensive reconsideration of the difficult technical, legal and public policy concerns raised by asset-level disclosure,” they said.   More>>>

Bipartisan vote on GSE reform set for April 29

In a written statement issued on March 28, Senate banking committee chairman Tim Johnson and ranking Republican member Mike Crapo said the committee is preparing to vote on bipartisan reforms to the government-backed housing finance market.

“After canvassing other members of the committee, we plan to schedule a markup of our bipartisan housing finance reform proposal on Tuesday, April 29,” said Mr Johnson. “I look forward to a thoughtful debate in committee as we seek to move reform one step closer to the finish line.”   More>>>

NY attorney general suggests alternative market structure to curb HFT abuses

New York Attorney General Eric Schneiderman, who has for several months been investigating high-frequency trading practices, has implied wider market participants may be complicit in giving advantageous millisecond time advantages to traders.

“Rather than curbing the worst threats posed by high-frequency traders, our markets, as structured today, are increasingly focused on catering to them,” he said.   More>>>

Pressure continues on US cross-border swaps rules

Relief for European trading platforms has not assuaged concerns about Dodd-Frank fragmenting global swaps markets, writes Philip Alexander.

The US Commodity Futures Trading Commission (CFTC) extended a deadline for European swaps trading platforms to comply with a key provision of the Dodd-Frank Act in March. But market participants are still alarmed over the implications for global swaps trading when the new extension expires. And the treatment of non-US counterparties executing trades in the US is also causing concern.   More>>>

Ministers relax control of resolution mechanism

The build-up period for the eurozone bank resolution fund is still long, but the European Council will have less power to intervene in decisions. Philip Alexander reports.

The European Council and European Parliament reached agreement on the Single Resolution Mechanism (SRM) for eurozone banks, just weeks ahead of the European Parliament’s final plenary session before elections in May 2014. While members of the European Parliament (MEPs) have agreed to a build-up period for the associated Single Resolution Fund (SRF) that was longer than they wanted, the European Council has made important concessions on the decision-making process.   More>>>

IMF asks ‘uncomfortable questions’

WASHINGTON, DC – Staff from the International Monetary Fund (IMF) research and global financial stability departments have urged regulators to enhance crisis management as a key part of the financial reform agenda. In a working paper entitled ‘The Regulatory Responses to the Global Financial Crisis: Some Uncomfortable Questions’, StijnClaessens and Laura Kodres warned that “policy-makers have to be more explicit about the analytical, practical and data constraints” to assessing the effectiveness of new regulatory proposals.

The report highlights a shortage of evidence about the effects of post-crisis financial regulation on the risks of a fresh financial crisis. It also criticises a lack of “rigorous theoretical analysis of recent and historical experiences”. The report’s authors also urge recognition that “institutional, political and other constraints will affect the final reform choices and the degree to which regulations are actually enforced”. Given the “likely inability” of regulators to prevent future financial crises, the report recommends prioritising bank resolution and formal burden-sharing mechanisms, both within and across jurisdictions.   More>>>

EU launches Solvency II technical standards

FRANKFURT – The European Insurance and Occupational Pensions Authority (EIOPA) has published a first set of draft implementing technical standards (ITS) for Solvency II. This follows approval by the European Parliament in March of the Omnibus II package that will enable Solvency II to proceed.

The consultation period for the draft ends on June 30, 2014, and EIOPA said it would submit the standards to the European Commission for final endorsement by October 31, 2014. The most important elements of this current round of ITS – with further topics still to be covered – are around the approval process for insurers’ internal models, and for the matching adjustment.   More>>>

Insurers call for G-20 caution on capital standards

SYDNEY – The Global Federation of Insurance Associations (GFIA) has called on the Australian presidency of the G-20 group of nations to avoid new regulations that could hamper the economic benefits of the insurance sector. The industry body noted that insurance companies covered $77bn of damage from disasters in 2012, and invested $4600bn in new premiums annually, especially in government and corporate bonds.

“It is vital that the ability of insurers to offer risk-transfer and retirement products and to invest long term is maintained and encouraged. The link must always be made between international regulatory initiatives and the G-20’s long-term growth objectives,” said GFIA chair Frank Swedlove.   More>>>

Calls for fair treatment of securitisation

BASEL – A group of 11 industry bodies worldwide has jointly delivered a 73-page response to the second consultation on revisions to the Basel securitisation framework. The response, from organisations including the Global Financial Markets Association, the Institute of International Finance and the International Swaps and Derivatives Association, was one of 28 received from banks, rating agencies and even the German automotive industry association. The Basel Committee on Banking Supervision (BCBS) published the paper in December 2013, with a deadline of March 2014 for comments.

The 11 trade bodies welcomed “some reduction of risk weights for higher credit quality exposures” compared with the previous consultation a year earlier. This means that banks will be able to hold lower capital against securitisation tranches on their balance sheet. The reduction had been achieved by lowering the floor on risk-weights, and allowing banks to take into account the credit protection provided by excess spread on the underlying assets relative to the yield paid on securitisation tranches.   More>>>

Europe tightens derivative definitions

BRUSSELS – The European Commission has written to the European Securities and Markets Authority (ESMA) to set out a broad definition of derivatives that includes foreign exchange (FX) forward contracts. This follows a letter from ESMA chair Steven Maijoor in February 2014 that requested clarification, after it appeared that the UK authorities were exempting FX forwards from the implementation of the European Market Infrastructure Regulation (EMIR).

Mr Maijoor had warned that “in order to avoid the inconsistent application of EMIR across the EU, ESMA understands that, until the European Commission provides clarification, and to the extent permitted under national law, National Competent Authorities will not implement the relevant provisions of EMIR for contracts that are not clearly identified as derivatives contracts across the EU.”   More>>>

EU consults on central depositories

PARIS – The European Securities and Markets Authority (ESMA) has published draft technical standards to improve securities settlement and central securities depositories (CSDs) in the EU. This consultation is the first step in implementing the central securities depositories regulation (CSDR) that was agreed between the European Council, European Parliament and European Commission in February.

CSDR is intended to maintain “post-trade infrastructures that safeguard financial markets and give market participants confidence that securities transactions are executed properly and in a timely manner, including during periods of extreme stress”. In particular, the authorities were concerned that the growth of cross-border settlements “calls into question the resilience, in the absence of common prudential rules, of CSDs when importing the risks encountered by CSDs from other member states”. Moreover, despite the increased cross-border activity, the EU agencies concluded that progress toward an integrated CSD market had been “very slow”.   More>>>

FSB puts faith in fresh capital buffer

LONDON – The Financial Stability Board (FSB) is targeting the completion of its new capital buffer concept for the end of 2014, in a bid to tackle multiple challenges facing the post-crisis regulatory regime. Speaking at a press conference after an FSB plenary meeting in London in March, FSB chairman Mark Carney repeatedly referred to the importance of the group’s gone-concern loss-absorbing capital (GLAC) initiative.

This would provide an extra layer of debt for the largest global systemically important banks (GSIBs), which could be bailed in as part of a bank resolution. The idea is that the GLAC would be converted into equity to ensure the creation of an adequately capitalised bridge bank that would take on the healthy assets and liabilities of a failed bank. This class of instrument is intended to provide an extra assurance that no bank is ‘too big to fail’, by reducing the risk that taxpayers would be called on to finance the salvage of those parts of a failed bank that have a long-term future. Mr Carney said there were no short cuts to addressing the problem of too big to fail.   More>>>

New warning on collateral risks

LONDON – The European Repo Council (ERC) has warned that the financial system may not be able to channel high-quality collateral where it is needed in the post-crisis regulatory architecture. This comes in the context of growing demands for collateral, as banks have increased their dependence on secured funding such as repos. Moreover, regulators continue their drive for centrally cleared transactions with higher margin requirements.

In a report entitled ‘Collateral is the New Cash: the Systemic Risks of Inhibiting Collateral Fluidity’, the ERC played down the idea of an overall shortage of collateral in the system. Although there could be imbalances between supply and demand, the report suggested that these may prove to be “short-term, localised, and in time corrected by increased prices for high-quality assets as well as other exogenous factors”.   More>>>

India delays Basel III implementation

MUMBAI – The Reserve Bank of India (RBI) has added an extra year to the transitional period for local banks to meet Basel III capital requirements. The final implementation date is now March 31, 2019. At the same time, the central bank clarified guidelines on the loss-absorption features required in non-equity capital instruments such as subordinated debt. Such instruments must now have permanent rather than temporary write-down features to qualify as capital.

The RBI noted that its decision followed “industry-wide concerns about the potential stresses on the asset quality and consequential impact on the performance/profitability of the banks. This may necessitate some lead time for banks to raise capital within the internationally agreed timeline for full implementation of the Basel III capital regulations.”   More>>>

Liquidity rules challenge South African banks

CAPE TOWN – Daniel Mminele, deputy governor of the South African Reserve Bank (SARB), said the Basel net stable funding ratio (NSFR) still posed a challenge for local banks, even after revisions made in January 2014. Speaking at a conference in March, Mr Mminele argued that the NSFR essentially favoured retail funding with maturities in excess of one year.

“Such a requirement disadvantages a banking system like that of South Africa, which while relying more on wholesale funding has nevertheless been part of a sound financial system,” he said.   More>>>

Task force to create benchmark for fair value

The International Valuation Standards Council and the International Accounting Standards Board have set their sights on reducing widespread divergence in fair value reporting, finds Charles Piggott.

Within the next two to three years, the International Valuation Standards Council (IVSC) says it plans to have fundamentals in place for International Valuation Standards (IVS) covering the most difficult and sometimes controversial practices in asset valuation. Sir David Tweedie, chairman of the IVSC, says: “We need to get standards on the valuation of financial instruments agreed. At the moment, these don’t exist, so it is a priority to get this done before the next financial crisis.”   More>>>

US states seek stronger role in global debate

State insurance regulators and legislators are pushing for greater representation on international bodies, says Philip Alexander.

The US National Association of Insurance Commissioners (NAIC) has written to the federal authorities asking for representation on the global Financial Stability Board. The NAIC, whose members are responsible for insurance regulation at the state level across the US, requested the ability to participate in FSB discussions that might affect the US insurance industry.   More>>>

Insurers press European Commission on solvency calibration

With the European Parliament preparing for elections after passing the Omnibus II package, insurers are lobbying the European Commission over draft delegated acts. Philip Alexander reports.

A plenary session of the European Parliament approved the Omnibus II legislative package in March, which amended and will enable the introduction of Solvency II insurance regulations in the EU. The focus now shifts to the delegated acts and technical standards that will be compiled by the European Commission (EC) and European Insurance and Occupational Pensions Authority (EIOPA).   More>>>

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