Monday, March 6, 2017

Four Disruptive Elements Drive Regulatory Activity

“Undercurrents of Disruption to Our Markets and Societies: How We Can Respond”

Author: David Schwartz

In her keynote address at the 2017 Brodsky Family Northwestern JD-MBA Lecture Series, CFTC Commissioner Sharon Y. Bowen described her thinking on the key trends driving regulatory activity. Commissioner Bowen identified “four disruptive elements” she believes are substantially responsible for changes that have been seen recently in financial markets. In turn, these disruptive elements are prompting questions about what they mean for markets and society, and what actions we should ask from regulators.

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Thursday, March 2, 2017

Congressional Report Takes on FSOC "Too Big to Fail" Designations

"FSOC Designations of ‘Too Big to Fail’ Firms are Arbitrary and Inconsistent"

Author: David Schwartz

The House Financial Services Committee (“House Committee”) issued a report on February 28, 2017 calling into question the process by which the Financial Stability Oversight Council (FSOC) designates certain non-bank companies as "too big to fail.” Based on subpoenaed documents requested by the House Committee and the sworn testimony of Treasury Department officials, the report concludes that the FSOC is "inconsistent and arbitrary" in exercising its power to designate certain nonbank companies as systemically important. The report echoes criticisms made by government watchdogs and courts of the FSOC's transparency and its nonbank SIFI designation process.  

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Tuesday, February 28, 2017

Is the US Poised to Break from Basel III?

Author: David Schwartz

In a letter dated January 31, 2017, Vice Chairman of the House Financial Services Committee Rep. Patrick McHenry (R-NC) called on Federal Reserve Chair Janet Yellen to cease negotiating "binding" international financial regulatory standards in such forums as the Financial Stability Board, the Basel Committee, and the International Association of Insurance Supervisors "until President Trump has had an opportunity to nominate and appoint officials that prioritize America's best interests.” 

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Monday, February 27, 2017

Basel Clarifies NSFR Repo Treatment

Author: David Schwartz

On February 24, 2017, the Bank for International Settlements (BIS) published a new set of responses to interpretation questions related to the Net Stable Funding Ratio (NSFR).[1] This release is a follow up to the initial FAQ published in July of 2016 and includes important guidance concerning the treatment of repo for purposes of calculating the ratio. The purpose of the NSFR to move banks to more stable sources of funding that are less vulnerable to shocks. Banks and financial institutions that rely on short-term financing have raised a number of concerns about the ratio’s treatment and weighting of repo and reverse repo transactions, with some even calling for repo to be exempt from the ratio altogether. The Basel Committee’s FAQ does not address all of these concerns. But the interpretations do provide valuable clarifications to some technical aspects the treatment of repo and securities finance transactions (SFT) for the purpose of calculating the ratio, including netting of repo and reverse repo and RSF factors applicable to secured funding transactions.[2]

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Sunday, February 26, 2017

Fintech Poised to Create a New Financial World

IOSCO Report Looks at Intersection of Fintech and Financial Regulation

Author: David Schwartz

“Fintech,” or financial technology," is a term that seems to be on everyone's lips these days, from bankers to global finance ministers.  Dramatic advances in computing power, speed, interoperability, and nearly instantaneous internet communication are changing the ways banks, brokers, and other financial institutions relate to their customers, investors, regulators, and each other. But what do these changes mean to the future of financial markets and regulation?  In February 2017, the International Organization of Securities Commissions (IOSCO) published a document that ambitiously charts the bewildering array of fintech innovations and describes how these innovations are beginning to intersect with securities markets regulation. Based on industry surveys, the report looks at the most important technological innovations affecting global finance and makes some observations about regulatory responses.

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