Sunday, April 23, 2017

Are Bank Regulations Harming Small Businesses?

Fed Survey Finds Small Businesses Face Credit Challenges

A Federal Reserve Report published on April 18, 2017 found that U.S. small businesses are facing hurdles in obtaining much-needed financing for growth. The study indicated that small businesses presently face significantly more stringent credit conditions when approaching their traditional sources of loans for equipment and expansion. The Fed report itself does not point the finger at regulation as the cause for this restriction in the ability of small businesses to access credit. However, large banks have had to tighten credit conditions significantly as a result of increased capital requirements, liquidity restrictions, and stress tests. Because these big banks are the primary source of the for all business financing in the U.S., and the number one source of loans to small businesses, any restrictions on the flow of financing arising out of new banking regulation will perforce affect small businesses. 

Thursday, April 20, 2017

Financial CHOICE Act 2.0

New Bill Retains the Theme of Version 1.0 with Some Tweaks

On April 19, Rep. Jeb Hensarling (R-TX) published a discussion draft of his Financial CHOICE Act (Version 2), updated from his original 2016 draft (Version 1). While keeping what the Rep. Hensarling calls its “pro-growth, pro-consumer” features that would end “too-big-to-fail” bailouts, the 2017 discussion draft of the Financial CHOICE Act walks back or modifies some key provisions from the 2016 version. Version 2 retains the "Dodd-Frank offramp,” the optional exemption from many Dodd-Frank regulations in exchange for higher capital reserves, that was the centerpiece of Version 1. This new version, however, provides more incentives to banks to take the offramp, in the form of exemption from stress testing. As with Version 1, Version 2 also repeals the Volcker Rule and eliminates enhanced supervision of financial market utilities designated as systemically important by the Financial Stability Oversight Council. The bill also adds new provisions drastically limiting the powers of the CFPB, and modifies various regulatory abilities of the SEC, PCAOB, and the CFTC.

Sunday, April 16, 2017

Basel Report: "Repo Markets are Not Settled Yet"

Global repo markets in transition post-crisis, regulatory changes and central bank stimulus

An April 12, 2017 report issued by the Bank for International Settlement’s Committee on the Global Financial System (CGFS) takes stock of the state of repo markets. Drawing on a number of sources, the report surveys the landscape of the repo markets, taking into account the effects of the financial crisis, changes in the regulatory landscape, and the unprecedented period central bank stimulus. 

Friday, April 14, 2017

FSB Launches Holistic Look at Regulatory Reforms

With the main elements of the G20’s core financial reforms underway, the Financial Stability (FSB) has proposed a framework to assess the effects of the reforms. In an April 11, 2017 consultation paper, the FSB proposes a structured framework specifying the processes and appropriate analytical approaches for the evaluation of the social benefits and cost of reform measure as well as identifying unintended adverse consequences. The paper considers the framework's:

 

  • scope, 
  • prioritization of evaluations, 
  • processes for measuring benefits and costs of the reforms, 
  • how to map objectives to intended outcomes, and 
  • the evaluation approaches and tools that could be used. 

Sunday, April 9, 2017

BIS Issues New Consultation on G-SIBs

On March 30, 2017, the Basel Committee on Banking Supervision (BIS) issued a consultation proposing changes to the framework employed to designate global systemically important banks (G-SIBs). The consultation also proposes higher capital requirements on G-SIBs. The revised G-SIB assessment framework supersedes the framework proposed by BIS in July of 2013, a process BIS has committed to revisit every three years. This latest revision maintains the previously adopted system assessing the relative systemic importance of internationally active banks based on 12 indicators in five categories, resulting in a score that measures the systemic importance of each bank. The bank's overall score is then mapped to buckets that are associated with a higher loss absorbency (HLA) capital requirement. However, the new consultation proposes some modifications to the framework and also seeks feedback on the introduction of a new indicator for short-term wholesale funding.

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