Global Risk Regulator PodcastRSS

This is a series of regular podcasts about financial regulation brought to you by Global Risk Regulator, a Financial Times publication. These podcasts involve discussions with industry experts who share their insights on the latest trends in prudential, markets and conduct regulation.

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Are stablecoins a threat to financial stability?

Stablecoins have seen explosive growth in the last year with the Bank for International Settlements estimating that as of late 2021, there were $120bn of them in circulation.

This has caught the attention of regulators who are pondering whether these instruments will revolutionize finance in a beneficial way for society or could become a major financial systemic threat.

To address those issues is Dante Disparte, chief strategy officer and head of global policy at Circle - an issuer of the USDC dollar stablecoin.

What impact will central bank digital currencies have on the financial system?

According to the Bank for International Settlements around 80 central banks are exploring or developing central bank digital currencies (CBDCs).

Some experts consider CBDCs to be among one of the most significant developments in the history of money. Depending on their design they could have a profound impact on the financial system and society.

This podcast explores a range of issues related to CBDCs, such as their design, should they be programmable, disintermediation of financial institutions, potential threats from stablecoins through to concerns around privacy.

Addressing those questions are John Velissarios Blockchain and Multiparty Systems - Digital Assets, Custody & CBDC Lead at Accenture and Kimmo Soramäki, founder & CEO at FNA who has worked for a number of central banks.

How will crypto regulation shape the future of traditional financial services?

The rise of blockchain and crypto assets are going to profoundly influence the future development of financial services and are naturally of great interest to supervisors. 

How supervisors decide to regulate crypto will in itself play a major role in how traditional financial services adapt to this new phenomenon. 

This episode looks at the approaches being taken in the EU, UK, US and some other jurisdictions and how it might impact the transition of crypto into mainstream finance. It also looks at how the recent consultation by the Basel Committee on Banking Supervision on the prudential treatment of crypto exposures will influence banks. 

Exploring these issues is Yves Longchamp, head of research at SEBA Bank, a Swiss bank providing a bridge between traditional and digital assets and Lavan Thasarathakumar, the regulatory affairs director EMEA at Global Digital Finance, an association advocating for digital assets.

A conversation with the CEO Of the Dubai Financial Services Authority about ESG, crypto and regulatory reporting

Environmental, social governance (ESG) factors and the rapid rise of crypto assets and currencies and blockchain have all become major focal points for supervisors. This is necessitating, in some cases, new regulatory frameworks or adapting existing ones. 

In this episode, Bryan Stirewalt, the CEO of the Dubai Financial Services Authority (DFSA) shares his insights into how the authority is approaching the regulation of crypto and he also delves into how the global adoption of ESG can be encouraged in a more standardised fashion.

Other topics covered include the DFSA’s work with international standard setters such as the Basel Committee on Banking Supervision where Mr Stirewalt represents non-Committee members. 

Could central bank digital currencies revolutionise capital markets? A discussion with the Swiss National Bank

The potential introduction of central bank digital currencies (CBDCs) could potentially upend bank business models depending on their design and implementation. It’s a topic, which has implications well beyond monetary policy and the nature of money. 

The rapid rise in the popularity of crypto currencies such as bitcoin, Facebook's plans around creating stablecoins backed by existing national currencies and the growing digitisation of financial services has prompted central banks to seriously investigate the viability of introducing CBDCs.

One central bank that has been very active in investigating this area through Project Helvetia, is the Swiss National Bank (SNB) along with its collaborators the Bank for International Settlements and the SIX Exchange. 

To gain a better understanding of project Helvetia, the possible impact of CBDCs on capital markets, clearing, foreign exchange and governance we approached Martin Schlegel, an alternate member of the board at the Swiss National Bank for his insights.

How might ESG impact prudential regulatory frameworks?

Prudential frameworks are designed to ensure banks can cope with risks and still remain solvent in the face of economic adversity. Environmental, Social and Governance (ESG) factors have risen up the political and regulatory agenda due to issues such as increasingly extreme weather patterns through to growing concerns over social justice. 

Society increasingly expects banks, as capital allocators, to do their bit in helping to fight climate change and to not support certain unethical businesses. This could eventually result in changes to the Basel framework through to the EU's capital requirements regulation and directive (CRR/CRD).

This podcast asks whether regulators should use green supporting and brown penalising factors to influence bank lending policies, how stress tests can ensure banks can cope with ESG related scenarios through to how to cope with the fact that there is not enough ESG data to populate bank risk models. 

Exploring this topic is Ingalill Aspholm, Head of Banking Prudential Regulation, Markets at Finance Finland and Jeroen Van Doorsselaere, Head of Global Product & Platform Management GRC Finance, Risk & Reporting at Wolters Kluwer - Financial Services Solutions

How is IOSCO driving a global ESG agenda for securities markets?

Environmental, Social, and Corporate Governance (ESG) are undoubtedly going to remain one of the most high profile topics impacting policy and financial regulation for years to come. 

ESG brings with it a whole set of new data, disclosure and reporting requirements meaning there is a great deal of work to do to create new frameworks. There is also a strong agenda among international bodies to create standards that work across borders for investors and issuers of securities alike.  

It is against this backdrop that The International Organization of Securities Commissions (IOSCO) is looking to create global ESG reporting guidelines and standards in a bid to make it easier for market participants to identify and compare ESG risks between individual securities and financial products.    

In this episode, Paul Andrews, the Secretary General of IOSCO, discusses a wide range of topics such as the fragmentation of ESG standards, data quality issues, working with other global bodies, ESG ratings, greenwashing and the likely timeline for upcoming IOSCO reports and consultations. 

How ready are corporates for the end of Libor after 2021?

The move from the London interbank offered rate compelled by regulators due to manipulation scandals towards alternative risk free interest benchmarks has been protracted and painful for those involved. 

Undoubtedly, much progress has been made with many sectors of the financial industry such as derivatives seemingly well prepared. But moving away from the financial sector towards corporates, preparations and transition arrangements have been slower and patchy, which has raised concern among central banks such as the US Federal Reserve Board and the Bank of England. 

This podcast explores the issues corporates have been having with transitioning to alternative interest rate benchmarks, how they’re coping with repapering contracts, the various legacy issues and the construction of the replacement risk free rates and their impact on pricing corporate loans.

Tackling these topics are Subadra Rajappa, head of US rates strategy at Société Générale and Sarah Boyce, Associate Director, Policy and Technical at the Association of Corporate Treasurers.

The Monetary Authority of Singapore plans to become the world’s leading technology driven central bank

Singapore is famous globally for its enthusiasm for technology and for pushing the envelope in this area. The Monetary Authority of Singapore very much follows in that tradition and is a pioneer in the use of supervisory technology (SupTech). 

It has a raft of projects designed to turn itself into the most advanced technology driven central bank in the world as it steadily digitises many of its functions. These range from fundamentally rethinking how data is harvested from financial firms and analysed for important insights through to detecting and disrupting money laundering activities. 

In this episode, Vincent Loy, Assistant Managing Director (Technology) at the Monetary Authority of Singapore discusses these various projects and their aims. 

How are banks managing Covid-19 operational risks?

When governments across the world ordered population lockdowns to stop the spread of the Covid-19 pandemic, banks had to quickly switch away from working in offices towards remote working - which has never been done before on such a big scale. This impacted almost the entire business from payments through to vast trading floors and all their support functions.

This episode explores the operational risk implications of this sudden and widespread shift in working patterns. 

In particular, the discussion covers the challenges of remote working in terms of banks maintaining their compliance functions, dealing with cyber risks, the challenges of dealing with paperwork and interacting with supervisors under these conditions. And finally, some thoughts are shared on how bank business and operating models may evolve post-Covid-19.

Discussing this topic is Kerry Peacock, Head of Operations EMEA and International Head of Operations for MUFG and Heather Adams, a Managing Director in Accenture’s Risk Practice.

What does the future hold for the Basel framework?

Following the 2007-9 global financial crisis - the Basel framework underwent significant revisions. It’s partly thanks to these changes that banks entered the Covid-19 pandemic induced crisis in a robust condition. 

Nonetheless, it remains unclear how deep and prolonged the current downturn will be and how many bad loans banks will notch up in the process. 

Therefore, could there be further revisions to the Basel framework? Particularly if the current crisis turns out to be particularly bad and badly damages the financial sector? Also, the world is far more divided than it was on the eve of the last financial crisis. How might this impact supervisory cooperation, deliberations within the Basel Committee and adherence to the Basel framework. And lastly, what impact might sustainable finance and climate change have on prudential frameworks? 

Addressing these topics is Bill Coen, former secretary general of the Basel Committee on Banking Supervision and chair of the IFRS Advisory Council. He also sits on the board of directors of the Toronto Centre, a global non-profit organisation that provides leadership training in financial supervision. Also, sharing his views is Paul Sharma, a Managing Director at Alvarez & Marsal and was a Deputy Head of the Prudential Regulation Authority and a former member of the Basel Committee

How will global banking regulation shape up after Covid-19?

Regulators, central banks and governments have taken unprecedented measures to support the economy during population lockdowns around the world to stamp out the spread of the Covid-19 pandemic.

Prudential regulators have also acted quickly to ensure banks help support the economy. This has involved measures ranging from payment holidays on some loans, to delayed reporting through to pushing back some regulatory implementation deadlines and even temporary relaxations of some capital requirements.

But are these measures temporary or do they signal a new trend where individual jurisdictions diverge from the bits of the Basel framework they don’t like?

In this series, Michael McKee, a partner at global law firm DLA Piper and David Strachan, the head of EMEA Centre for Regulatory Strategy at global consultancy Deloitte, have shared some insights as to how these trends might play out.

What impact is IFRS-9 forward provisioning having on banks during the Covid-19 crisis?

The economic fall-out from the Covid-19 pandemic is the first major test for the IFRS-9 accounting standard, which only came into force in 2018. 

Global Risk Regulator chaired a discussion about how banks are interpreting the IFRS-9 standard, what approaches they’re taking to forward provisioning for bad loans and how they’re accounting for regulatory guidance around how they should provision for non-performing loans. 

The two experts who took part in the discussion were Jane Fuller who is a co-director at the Centre for the Study of Financial Innovation and a fellow at the CFA Institute UK and Damien Burke who is a partner at the credit risk consultancy, 4Most.