Monday, June 18, 2012

The Ins and Outs of Deloitte's "Shadow Banking Index"

Author: David Schwartz J.D. CPA
Deloitte LLP has come up with clever new way to describe and track the size and changes in the shadow banking industry. Recognizing that market participants and regulators lacked clarity and consistency when it came to defining, measuring, and framing the debate about this complex and dynamic subject, Deloitte has devised a "Shadow Banking Index." Starting with a baseline definition and using data gathered from 2004 onward, Deloitte's index represents an ongoing effort to more closely measure the size, importance, and effect of market and regulatory actions on the activities defined as "shadow banking." The index is also intended as a way to assess the potential effect of shadow banking on regulated markets.
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Saturday, June 9, 2012

Hedge Funds: "We're not Shadow Banks"

Author: David Schwartz J.D. CPA
In a May 16, 2012 letter to the European Commission, the Managed Fund Association (MFA), an association of hedge funds and managed future firms, shot back at the FSB's greenpaper on shadow banking. In its response, MFA argues that it was a mistake to include hedge funds as part of the shadow banking system as the FSB has defined it. Neither their funding characteristics nor relative size should warrant regulation of hedge funds to a greater degree than other investment sectors.
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Wednesday, June 6, 2012

"What Good are your MMF Rules?," U.S. Congress asks SEC.

Author: David Schwartz J.D. CPA
Per the 2013 U.S. Financial Services and General Government Appropriations Bill of the House Appropriations Committee, the SEC must perform an in-depth study on the effectiveness of the Commission's long standing rules, as well as the more recent money market regulatory reforms. In particular, Congress wants to know whether these rules help in providing liquidity to the capital and municipal markets and to what extent they promote and enhance money market fund stability, resiliency, and transparency.  This proposed legislation just adds to the ongoing discussion among US regulators, Congressional leaders, and international oversight bodies on the systematic risks still posed by money market funds.  
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Tuesday, May 29, 2012

ESMA Claims Lead in Regulating OTC Derivatives

Author: David Schwartz J.D. CPA
Verena Ross, Executive Director of the European Securities and Markets Authority, says that the EU will lead by example in the harmonization and convergence of regulation of OTC derivatives.  With the plan for the EU regulation of OTC derivatives, central counterparties, and trade repositories (EMIR) now having been agreed upon by the European Parliament and the Council, ESMA is due to deliver draft regulatory and implementing technical standards under EMIR in June. Ross believes that if the EU is able to harmonize regulation and integrate supervision in Europe, the same convergence is possible, and necessary, globally.
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Thursday, May 24, 2012

German Regulator at Odds with Global Peers on Shadow Banking Wraps

Author: David Schwartz J.D. CPA
In a recent interview, Dr. Elke König, the head of Germany's Federal Financial Supervisory Authority (BaFin), called for the swift regulation of shadow banking and derivatives. Critical of the FSB's data gathering approach to shadow banking, König said that regulators must push ahead with regulating shadow banking and derivatives straight away. According to König, ignoring or slow walking these reforms will guarantee unpleasant surprises in the near future.  Consequently, she sees it as her mission to rekindle progress in these areas.  
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