Category: All | Page 22

Fed Remains Concerned About Firesale Risks

by David Schwartz J.D. CPA, Executive Director | Thursday, November 19, 2015 | All, Change Overview and Rationale, Formal Regulatory Remedies

In a January 30, 2015 address, Federal Reserve Board Governor Daniel K. Tarullo once again voiced the Fed’s concerns about the systemic risk posed by potential firesales in the asset management industry. Tarullo indicated that as regulators implement reforms under the Basel and FSB proposals and frameworks, they should take into account the “system-wide demands on liquidity during stress periods and correlated risks among asset managers that could exacerbate liquidity, redemption and fire-sale pressures.”

FSOC Focused on Asset Management and Reaching a Broader Audience

by David Schwartz J.D. CPA, Executive Director | Monday, November 16, 2015 | All, Change Overview and Rationale, Formal Regulatory Remedies

During their most recent meeting, the Financial Stability Oversight Council revealed that the asset management sector remains an area of concern to the super-regulator. According to minutes of the November 2, 2015 meeting, the FSOC has identified six categories of potential risk arising from the asset management sector and is conducting ongoing analyses with an eye toward more regulation.

DTCC Studies the Risks of Interconnectedness

by David Schwartz J.D. CPA, Executive Director | Wednesday, October 28, 2015 | All, Change Overview and Rationale

The financial crisis made clear that interconnectedness and complexity have the potential to magnify localized shocks and amplify and transmit them to the greater financial system. Understanding the risks posed by our ever more interconnected global financial system is crucial to managing those risks.

House Committee Faults FSOC for “Lack of Transparency” in SIFI Designations

by David Schwartz J.D. CPA, Executive Director | Monday, October 19, 2015 | All, Formal Regulatory Remedies, Procedural Changes

In a nearly four-hour hearing held on December 8, 2015, members of the House Financial Services Committee grilled the heads of the Financial Stability Oversight Council (FSOC), accusing the FSOC of a poor transparency and lack of responsiveness to legislators’ requests for information. Led by Representative Jeb Hensarling (R-TX), the House Financial Services Committee heard testimony from eight of the ten FSOC members, including the heads of the SEC, CFTC, FDIC, OCC and the FHFA. The Treasury Secretary and Federal Reserve Chair did not testify.

Rep. Hensarling, in both his opening remarks and in questioning, faulted the FSOC on what he termed a lack of transparency, noting that two-thirds of the FSOC’s meetings were conducted behind closed doors and disclosures about the meetings were almost devoid of details. According to Rep. Hensarling: “FSOC has earned bipartisan condemnation for its lack of transparency. Two-thirds of its proceedings are conducted in private. Minutes of those meetings are devoid of any useful substantive information on what was discussed.”

FINRA Will Repeat Liquidity Stress Tests in 2016

by David Schwartz J.D. CPA, Executive Director | Monday, October 19, 2015 | All, Change Overview and Rationale, Formal Regulatory Remedies

In a preview of FINRA’s 2016 letter on regulatory priorities and emerging risks, FINRA’s CEO, Richard Ketchum said that FINRA’s exam focus in the upcoming year will be on three key issues: outsourcing, cyber risk and liquidity concerns. Ketcham also said that FINRA will repeat “some version” of its liquidity stress tests in 2016, further indicating that these stress tests will be an ongoing focus of FINRA.

Summer 2015 Financial Regulatory Update

by David Schwartz J.D. CPA, Executive Director | Monday, October 19, 2015 | All, Change Overview and Rationale, Formal Regulatory Remedies

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).

B of E Explores Accepting Equities as Collateral

by David Schwartz J.D. CPA, Executive Director | Wednesday, October 14, 2015 | All, Change Overview and Rationale, Formal Regulatory Remedies, Procedural Changes

In a speech in July before at the Money Markets Liaison Committee in London, Chris Salmon, Executive Director, Markets, Bank of England hinted that the Bank of England was exploring means by which it could accept equities as collateral for its market operations, should the need arise. Although short on details, Mr. Salmon said that removing roadblcoks to accepting equities as collateral would bolster the bank’s flexibility in times of stress as well as in normal market conditions.

“At present, the Bank accepts a very broad range of collateral, including government bonds, asset backed securities and pools of ‘raw’ loans. But the Bank can further bolster its flexibility by removing any technical obstacles to accepting equities as collateral, should the need arise.”

While short on details, Mr. Salmon did indicate that the regulatory and other work necessary to facilitate the Bank’s acceptance of equities as collateral would take place through the balance of 2015 and well into 2016.

Regulators Focus on Liquidity Risk Management

by David Schwartz J.D. CPA, Executive Director | Tuesday, September 22, 2015 | All, Change Overview and Rationale, Formal Regulatory Remedies

Since the liquidity freeze during the financial crisis, liquidity risk management has been a concern to regulators thorughout the financial industry. Last week, the the SEC proposed new rules addressing liquidity management in open end funds and the Financial Industry Regulatory Authority issued guidance regarding effective liquidity management at broker-dealers.

PWC Studies the State of Global Financial Market Liquidity

by David Schwartz J.D. CPA, Executive Director | Sunday, August 30, 2015 | All, Change Overview and Rationale

PWC has published an August 2015 study commissioned by The Global Financial Markets Association (GFMA) and the Institute for International Finance (IIF) intended to examine the post-crisis state of global financial market liquidity. Among its findings, the study...

SEC to Propose Limits on Use of Derivatives by Mutual Funds

by David Schwartz J.D. CPA, Executive Director | Wednesday, August 19, 2015 | All, Change Overview and Rationale, Formal Regulatory Remedies

The Securities and Exchange Commission has announced that it will hold hearings on December 11 to “consider whether to propose a new rule and amendments to certain proposed forms related to the use of derivatives by registered investment companies and business development companies.” This move is not unexpected as the SEC has long been concerned with how funds’ use of derivatives might affect compliance with leverage restrictions, and raise issues with fund portfolio diversification, concentration, and valuation. In 2011, the SEC issued a concept release seeking input on these very issues.

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