In her March 29, 2016 keynote address before the Mutual Fund Directors Forum’s annual policy conference, SEC Chair Mary Jo White laid out some of her thoughts on the role of mutual fund directors in assessing risks and exercising their oversight responsibilities. In addition, she highlighted recent changes in markets and regulation affecting the role of fund directors, as well as some of the potential challenges ahead.
Banking and financial markets have always been innovative. But globalization, new regulation, and changes in technology have heightened the pace of innovation dramatically. According to a whitepaper published in March 2016 by the Office of the Comptroller of the Currency (OCC), while banks continue to innovate, “rapid and dramatic advances in financial technology are beginning to disrupt the way traditional banks do business.” In the face of this disruption, the OCC has used this white paper to enumerate eight “guiding principles” that the agency says it has formulated “to guide the development of its framework for understanding and evaluating innovative products, services, and processes that OCC-regulated banks may offer or perform.”
In a report released March 28, 2016, the GAO concluded that fragmented and overlapping oversight has created inefficiency in the U.S. financial market regulatory structure. The GAO recommended that Congress should consider taking steps to reduce or better manage fragmentation and overlap, and also determine whether legislative changes are needed to align Financial Stability Oversight Council’s (FSOC) authorities with its mission to respond to systemic risks.
Banks drive economic growth by providing financing for consumers and businesses. To provide this vital financing, their business models rely heavily on cheap and efficient maturity transformation made possible, in part, through short-term financing. With an implementation date less than one year away, banks and their industry groups are raising the alarm about how the Basel III Net Stable Funding Ratio (NSFR) may drive up severely the cost of short-term financing, thereby stalling the engines of economic growth, harming global liquidity, and increasing rather than reducing systemic risks.
The Basel Committee on Banking Supervision today released a consultative document proposing a set of changes to the Basel III framework’s approaches for determining Banks’ regulatory capital requirements for credit risk. The goals of these changes are to (i) reduce the complexity of the regulatory framework and improve comparability; and (ii) address excessive variability in the capital requirements for credit risk.
In an October 20, 2016 address before the British Bankers Association’s Annual International Banking Conference, Dr. Andreas Dombret, Member of the Executive Board of the Deutsche Bundesbank, highlighted the environment of uncertainty in which banks currently operate. In addition to such things as technological change and Brexit, he also spoke about the fear and loathing arising from regulatory uncertainty and hinted at some ways regulators can help to lessen the regulatory strain.
In a March 7, 2016 speech at the Institute of International Bankers Annual Washington Conference in Washington, DC, Federal Reserve Governor Lael Brainard remarked that new regulations may be having inadvertent effects on market liquidity. Governor Brainard’s statement is notable because Fed officials and regulators have been careful to avoid that inference.
Among the priorities in the European Commission’s (EC) list of its planned initiatives for 2016 is a new push to refine a package of reforms under its Markets in Financial Instruments Directive (MiFID II). After announcing just last month that MiFID II implementation would be delayed by year to January 3, 2018 due to the overwhelming complexities involved, the EC indicated that it would focus on a number of technical points in MiFID II that need to be specified further, including:
On February 10, 2016, the Securities and Exchange Commission approved final rules intended to ensure that both U.S. and foreign dealers are subject to U.S. regulation when they engage in security-based swap dealing activity in the United States. The new rules require non-U.S. companies that use staff in a U.S. branch or office to arrange, negotiate, or execute a security-based swap transaction in connection with its dealing activity to include that transaction in determining whether it is required to register as a security-based swap dealer.
Financial markets in the 21st Century are profoundly global. This fact was amply demonstrated by the 2007 – 2009 financial crisis, which was centered in the banking systems of the developed western economies but transmitted with devastating effect to economies worldwide. And yet, despite the global consequences of systemic risk transmission, the supervision of financial markets remains essentially a national discipline.