Tuesday, June 20, 2017

Beefing Up Public Company Audit Reports

New Standards for Public Company Audit Disclosure

Author: David Schwartz

On June 1, 2017, the Public Company Accounting Oversight Board (PCAOB) voted to adopt new standards for public company audit reports. The new auditing standard, AS 3101, is the result of nearly eight years of work by the PCAOB with members of the public accounting profession, regulators, academics, and investor groups. If approved by the Securities and Exchange Commission, this new standard will change the scope of the current auditor’s report. AS 3101 retains the unqualified versus qualified (pass versus fail) opinion of the existing auditor's report, but makes significant changes to the auditor's report by adding a new section highlighting what the PCAOB calls “critical audit matters” (CAM). Adding CAM to audit opinions is intended to better highlight key areas of risk information to reduce the information asymmetry between users of a company’s financial statement and the company's management.

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Thursday, June 15, 2017

Treasury Dept. Issues Regulatory Core Principles

Author: David Schwartz

In response to Executive Order 13772, on June 14, 2017 Treasury Secretary Steven Mnuchin published a report identifying recommendations for changes to the regulation of the U.S. financial system in a manner consistent with the Executive Order's "core principles." Some of the “core principles” laid out in the executive order are addressed in bills currently being debated in Congress. The report takes up some of these same issues, but with slightly different approaches than those proposed by legislators. The publication is the first in a series of reports planned by the Treasury Department. This report focuses on the depository system.

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Monday, June 12, 2017

BIS Issues Further LCR Guidance

Includes steps toward calibration of the LCR to address short term financing activities

Author: David Schwartz

On June 8, 2017, the Basel Committee on Banking Supervision (BIS) issued a second set of frequently asked questions (FAQs) and answers on Basel III's Liquidity Coverage Ratio (LCR). This latest guidance responds to questions and requests for clarification received from commenters to the Basel Committee’s January 2013 publication of the LCR standard. The June 8 release combines new guidance with the existing FAQs published in April 2016 to form a complete set of LCR interpretations to date. Among these interpretations are some meaningful steps toward calibration of the LCR for short term financing transactions. 

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Sunday, June 4, 2017

FSB Publishes its Sixth Annual Shadow Banking Survey

Sector Remains Robust and Growing Despite New Regulation

Author: David Schwartz

The Financial Stability Board’s (FSB) sixth annual shadow banking survey found that the shadow banking market remains robust and growing, equivalent to 13 percent of total financial system assets and 70 percent of the GDP of 28 covered jurisdictions. The report published May 10, 2017  presents the results of the FSB’s annual monitoring exercise to assess global trends and risks in the shadow banking system, reflecting data up to the end of 2015. It covers 28 jurisdictions, adding Belgium and the Cayman Islands for the first time. Notably, however, China failed to provide data for this latest report.[1] 

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Tuesday, May 30, 2017

Is Final Basel III Just Around the Corner?

"The output floor is the final piece of the jigsaw”

Author: David Schwartz

In speeches on April 5 and May 25, 2017, William Coen, Secretary General of the Basel Committee, hinted that final Basel III standards are “just around the corner.” Despite a setback in January 2017 in which the Committee members could not reach accord on the calibration of the aggregate output floor, Coen signaled optimism for the upcoming meeting the Committee in June. In a May 25 speech, Coen announced that ‘based on feedback from the consultative process and the results of our impact studies, the Committee has largely completed the technical work needed to revise the framework.” Despite this optimism, calibration of the output floor still remains somewhat of a sticking point, one that Coen says “is the final piece of the jigsaw.”

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