Latest articles from Staff

Asset managers adjust to MiFID II through outsourcing, technology and cost-cutting

The introduction of MiFID II is a huge shake-up for capital markets and its impact is felt well beyond the EU. Asset managers have responded by cutting costs, deploying more technology and outsourcing to third parties able to provide expertise and economies of scale.

BIS warns on falling risk weights

The Bank for International Settlements’ (BIS) 84th annual report has warned that falling risk weightings on bank assets partially undermine improving capital positions. The report found that the global capital shortfall for banks to reach the Basel minimum capital ratio was €85.2bn as of mid-2013, which was a substantial narrowing of €59.6bn from a year earlier.

EU consults on resolution financing

The European Commission has published a consultation paper on the method for financing the single resolution fund for the banking union, as well as national resolution funds for other EU member states under the Bank Recovery and Resolution Directive (BRRD). The essential concept of a levy that combines a flat rate based on size and a variable rate based on the risk profile of each bank was set out in BRRD, but the commission is now preparing secondary legislation to specify how these levies will be calculated. It must also decide the relative balance between a flat rate and a variable component. The contributions are designed to ensure that funds are available to manage a bank failure – for instance, to finance a bridge bank for healthy assets and liabilities – without drawing on taxpayer resources as a first resort.

IMF reassures on liquidity rules

Researchers at the International Monetary Fund (IMF) have concluded that concerns over the Basel Committee’s net stable funding ratio (NSFR) may be exaggerated, following the most extensive global study to date. The Basel Committee on Banking Supervision has undertaken quantitative impact studies covering its 27 member jurisdictions. By contrast, staff in the IMF monetary and capital markets department took a sample of the largest banks in each of 128 countries, plus the top 100 banks worldwide by assets.

Banks fret over MiFID liquidity definitions

The future of trading in less liquid assets depends on the correct calibration of liquidity definitions in the Markets in Financial Instruments Regulation (MiFIR), market participants are warning. MiFIR will extend trading obligations such as pre- and post-trade transparency beyond equities for the first time in the EU, to take in fixed-income and derivative transactions. However, these obligations will only apply to assets considered sufficiently liquid.

Analysts divided on Indian resolution regime

A working group convened by the Reserve Bank of India has put bank resolution on the agenda of the incoming Indian government, but analysts remain unsure whether it will be implemented. The working group has made recommendations that would include depositor preference over senior and subordinated bondholders, and an ‘ownership-neutral’ approach that would see India’s substantial state-owned banking sector receive the same treatment as privately owned banks.

IMF retreats on sovereign restructuring plans

The International Monetary Fund (IMF) has published a new paper on sovereign debt restructuring that represents a partial retreat from proposals made in May 2013. The multilateral lender had faced criticism after its bail-out of Greece in 2010, when it became clear that the government’s debt burden was not viable even after IMF assistance. Greece restructured its sovereign bonds in 2012, but questions remain about whether the government will be able to repay the volume of debt it now owes to official sector lenders including the IMF.

US regulator warns on falling lending standards

The Office of the Comptroller of the Currency (OCC), one of the key US bank regulators, has warned that underwriting standards are slipping as competition intensifies. In its semi-annual report, the OCC singled out syndicated leveraged loans and indirect auto lending as two areas of concern. The regulator flagged up signs of increased credit risk, including “increasing collateral advance rates, waiving or loosening of guarantees, and more liberal repayment terms such as extended periods of interest-only payments.”

Gerard Hartsink becomes first chair of GLEIF

The Financial Stability board (FSB) has appointed the inaugural 16-member board of the Global Legal Entity Identifier Foundation (GLEIF). The foundation, which forms the operational arm supporting the global development of LEIs, will be chaired by Gerard Hartsink.

Regulatory rethink on risk disclosures

The Basel Committee on Banking Supervision (BCBS) has published proposals enhancing risk disclosures standards. The Review of the Pillar 3 disclosure requirements, published on June 24, sets out the findings of phase one of the review by the BCBS.