The Fed, Financial Stability Board, and the Bank for International Settlements have beein quite busy this summer, and each issued rules or consultations in July furthering Basel III initiatives. On July 1, the Basel Committee issued a consultative document on its review of the credit valuation adjustment risk framework; on July 2, the FSB launched a peer review on the implementation of its policy framework for financial stability risks posed by non-bank financial entities other than money market funds (i.e., shadow banks"); and on July 20, the Fed finalized its capital surcharge rule for the eight US global systemically important banks (G-SIBs).

In their 84th Annual Report, the Bank for International Settlements examines the current state of global financial affairs and highlights some trends it sees emerging in the financial framework.  While noting that the overall financial system has has gained some strength since the crisis, banks remain in a rebuilding phase, concentrating  their business models towards traditional banking. Despite their apparent recovery, BIS warns that banks face lingering balance sheet weaknesses from direct exposure to overindebted borrowers, the drag of debt overhang on economic recovery and the risk of a slowdown in those countries that are at late stages of financial booms. They also note that in the current financial landscape, market-based financial intermediation has expanded, notably because banks face a higher cost of funding than some of their corporate clients.  Asset managers appear to have stepped into the gap left by banks in the intermediation markets.  Their rapid growth in this area together with high size concentration in the sector, BIS warns, may influence market dynamics and hence the cost and availability of funding for firms and households.