On July 3, 2015, the European Banking Authority (EBA) published its seventh semi-annual report assessing the risks and vulnerabilities in the European banking sector. The July report summarizes the primary developments and trends that have affected the EU banking sector since mid-2014 until June 12, 2015 as well as the EBA’s view of the key micro-prudential risks in the near future.
The Federal Reserve Bank of New York’s Tri-Party Repo Infrastructure Reform Task Force issued a progress report on June 24, 2015. The report touts some impressive progress since the task force’s last update in 2014, including the implementation of the task force’s new settlement regime by the major tri-party clearing player, Bank of New York Mellon.
The global regulatory calendar for the first quarter of 2015 includes comment deadlines for a number of consultation papers and rule proposals. We have compiled a list of the closing dates of many, if not all, of the major comment periods.
In a September 30, 2015 speech before the SIFMA Liquidity Forum in New York, Fed President and Chief Executive Officer William C. Dudley addressed concerns that market liquidity is being hindered by regulation. While open to the idea of finding a better balance between new regulations and improved trading conditions, Dudley stated that he found, “the evidence to date that liquidity has diminished markedly is, at best, mixed.” In addition, Mr. Dudley does not find any real evidence that regulations are the primary cause of changing liquidity conditions in the bond and other markets.
Amidst the series of legal settlements in recent months by global banks for forex market manipulation, the Bank for International Settlements (BIS) has announced that it will set up a working group under its Markets Committee to study improvements in the foreign exchange markets.
In a unanimous opinion issued on May 18, 2015, the Supreme Court confirmed a continuing duty of ERISA trustees to monitor investments. Although the case involved a complicated procedural history before arriving at the Supreme Court, the lawsuit presented a fairly simple question: is it sufficient for the ERISA duty of prudence that the fiduciary make prudent decisions to invest in the first instance, or must the fiduciary also make prudent ongoing decisions about whether it should change the composition of the plan’s portfolio or otherwise sell assets?
On December 7, 2014, the Bank for International Settlements (BIS) issued its latest quarterly review. Looking back at the year, and the quarter in particular, BIS sees signs of a buoyant global economy, however tempered by indications of some fragility.
At the end of April, the Bank for International Settlements (BIS) issued its eighth progress report on the adoption of the Basel regulatory framework. This report provides a high-level overview of the progress made by Basel Committee member states in adopting the Basel II, Basel 2.5, and Basel III framework as of the end of March 2015.
Prior to the financial crisis, regulators only had limited data available to them about securities lending and repo markets. The crisis exposed a number of vulnerabilities previously not recognized as a result of this lack of data. Right away, regulators realized that the only way to understand and effectively address these weaknesses — leverage and liquidity risks, weak market infrastructure, and fire sale risks — was to obtain more and better regulatory data about securities lending and repo volume, the types and quality of collateral being employed, and how securities lending and repo fit into firms’ risk management processes. But a recent release by the Office of Financial Research says these data collection efforts are not enough. According to the OFR, despite the efforts of regulators, significant gaps remain, and “the risk of set fire sales before or after a counterpart default remains largely unaddressed.”
JPMorgan Chase & Co has agreed to pay $100 million to settle a U.S. antitrust lawsuit in which investors accused it and 11 other major banks of rigging prices in the $5 trillion-per-day foreign exchange market. Investors sued the 12 banks alleging that traders at each conspired to rig foreign currency exchange transactions to boost profit at the expense of bank customers and investors.