Sunday, July 16, 2017

Securities Finance Faces 'Fickle' Future

EU Central Banker Raises Liquidity and Collateral Concerns

Author: David Schwartz J.D. CPA

In a June 21, 2017 address before the 26th Annual Securities Finance and Collateral Management Conference in Berlin, Deutsche Bundesbank Board Member Professor Joachim Wuermeling warned that the securities finance sector faces some unique liquidity and collateral challenges. In particular, he noted that the extraordinary measures taken by central banks to shore up liquidity in the years since the financial crisis may be distorting liquidity and affecting collateral quality in securities lending and repo markets.  Measures like the Public Sector Purchase Programme (PSPP) and central bank securities lending and bi-lateral repo facilities intended to backstop liquidity in securities financing markets may, in the long run, have unexpected effects on liquidity and could have a negative effects on transaction costs and order book depth, creating “fickle” conditions for market participants. 

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Thursday, June 29, 2017

Fed urges Recalibration, Not Repeal, of Dodd-Frank Reforms

Outlines Fed's Guiding Principles for Recalibration

Author: David Schwartz J.D. CPA

In Congressional testimony on June 22, 2017, Federal Reserve Governor Jerome H. Powell highlighted the progress that has been made since the financial crisis in improving the resiliency and resolvability of the U.S. banking industry. Having achieved the primary goals of re-regulation, however, Powell believes that the time is ripe "for us to look for ways to reduce unnecessary burden." In his statement, Governor Powell urged the lawmakers on the Senate Committee on Banking, Housing, and Urban Affairs not to roll back Dodd-Frank reforms, but to recalibrate them.

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Thursday, June 15, 2017

Treasury Dept. Issues Regulatory Core Principles

Author: David Schwartz J.D. CPA

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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Wednesday, May 24, 2017

FDIC's Hoenig Offers Market-Based Cure for Regulatory Ills

Urges Openness to Regulatory Alternatives

Author: David Schwartz J.D. CPA

In a keynote address before the Systemic Risk and Organization of the Financial System Conference in California on May 12, 2017 FDIC Vice Chairman Tom Hoenig announced his novel market-based proposal to strengthen the financial system and provide regulatory relief and foster long-term economic growth.  According to Hoenig, even after the financial crisis, "the U.S. financial system remains heavily subsidized, increasingly concentrated, and, despite a host of new efforts to safeguard the system, it continues to be vulnerable to inevitable financial shocks.” Mr. Hoenig has long been a proponent of a new organizational model that would turn the industry back toward capitalism. The Vice Chairman’s proposal is a plan whose goal is to "ensure that the public safety net is not expanded beyond the traditional banking activities that it was originally designed to support and to restore open market competition within the financial services industry.”

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Sunday, May 7, 2017

CFTC Seeks Input on Simplifying Regulations

Author: David Schwartz J.D. CPA

In a speech before the US Chamber of Commerce’s 11th Annual Capital Market Summit, the CFTC’s acting Chairman J. Christopher Giancarlo announced a new project to simplify the agency’s regulations. Remarking that, "America’s derivatives markets are struggling, in some cases, under the weight of flawed and excessive regulation,” Chairman Giancarlo introduced the CFTC’s new focus on reinterpreting its regulatory mission consistent with the goals of the Trump Administration’s Executive Order on regulation. To achieve these goals, the CFTC will be seeking input from industry on where existing CFTC regulations can be simplified and made less costly.

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