All - Center for the Study of Financial Market Evolution (CSFME)

FSB Moves for More Transparency in Repo and Securities Lending Markets

by David Schwartz J.D. CPA | Tuesday, November 18, 2014 | All, Formal Regulatory Remedies, ROSE

This latest consultation document is part of a larger effort by the FSB to increase transparency in “shadow banking” activities like securities lending and repo to detect financial stability risks, develop policy responses, and assess global trends in financial stability. Echoing the sentiments of Mr. Carney, Daniel Tarullo, Chairman of the FSB Standing Committee on Supervisory and Regulatory Cooperation, stated that “timely, comprehensive and consistent data collection is essential for authorities in identifying the build-up of leverage and other financial stability risks in global securities financing markets. The implementation of the proposed standards and processes will allow authorities to establish a monitoring framework to support their efforts to effectively address financial stability risks stemming from securities financing.”

Eaton Vance Scores Huge Victory on Non-Transparent ETFs

by David Schwartz J.D. CPA | Thursday, November 13, 2014 | All, Formal Regulatory Remedies

On November 6, 2014, the Securities and Exchange Commission granted Eaton Vance’s request to launch an “exchange traded managed fund” (ETMF), a new kind of exchange traded fund. Only a week before, the SEC provisionally denied similar requests for ETMFs from Blackrock and Precidian Investments.

Shadow Banking: Less is More.

by David Schwartz J.D. CPA | Tuesday, October 28, 2014 | All, Change Overview and Rationale

It has generally been acknowledged that shadow banking was the “epicenter for the global financial crisis.” High leverage made the shadow banking system fragile, and an initial run on shadow institutions was then transmitted throughout an interconnected global banking system. Despite this bit of now seemingly conventional wisdom, the primary response from regulators to the financial crisis has been to increase the capital requirements for chartered banks.

AIG Fights for $308M in Economic Substance Claim

by David Schwartz J.D. CPA | Wednesday, October 22, 2014 | All

In 2009, American International Group (AIG) sued the Internal Revenue Service (IRS) to recover approximately $306 million in denied tax credits. After negotiating a tortuous litigation process, the dispute has surfaced again in court. On October 17, 2014, AIG argued before the Second Circuit Court of Appeals that six transactions it entered into from 1993 to 1997 were part of a bona fide spread banking activity and that it should recoup millions in foreign tax credits denied by the IRS relating to the transactions.

SEC Adopts Final Cross-Border Security-Based Swap Rules

by David Schwartz J.D. CPA | Sunday, October 19, 2014 | All, Change Overview and Rationale, Formal Regulatory Remedies

On June 25, 2014, the Securities and Exchange Commission finalized new rules and interpretive guidance addressing the cross-border application of a security-based swap regulatory framework called for under the Dodd-Frank Act. These final rules are the first of a series of rules and guidance on cross-border security-based swap activities for market participants. According to the SEC, these new rules will be key to finalizing the remaining outstanding proposals on security-based swaps.

FSB Proposes New Framework for Haircuts on Non-Centrally Cleared Securities Financing Transactions

by David Schwartz J.D. CPA | Wednesday, October 15, 2014 | All, Change Overview and Rationale, Formal Regulatory Remedies

“Securities financing transactions such as repos are important funding tools for a wide range of market participants, including non-bank financial firms. The implementation of the numerical haircut floors on securities financing transactions will reduce the build-up of excessive leverage and liquidity risk by non-banks during peaks in the credit and economic cycle. It will be important for the FSB to monitor the impact of the framework following the implementation to help ensure that it achieves these objectives.”

— Daniel Tarullo, Chairman of the FSB Standing Committee on Supervisory and Regulatory Cooperation

ESMA Proposes Mandatory Clearing for FX Non-Deliverable Forwards

by David Schwartz J.D. CPA | Wednesday, October 15, 2014 | All, Change Overview and Rationale, Formal Regulatory Remedies

The European Securities and Markets Authority is seeking input on its plans for mandatory central counterparty clearing of foreign exchange non-deliverable forwards (FXNDF). FXNDFs are cash-settled foreign exchange forward contracts that cannot result in physical delivery of the designated currencies at maturity. FXNDFs allow hedging of currencies where government regulations restrict foreign access to local currency or the parties wish to compensate for risk without a physical exchange of funds.

Shadow Banking Remains on the FSB Agenda

by David Schwartz J.D. CPA | Tuesday, September 23, 2014 | All, Change Overview and Rationale, Formal Regulatory Remedies

Following its September meeting in Cairns, the Financial Stability Board (FSB) has published a press release highlighting some of the vulnerability the FSB still sees as threatening the global financial system. The release also lays out some work plans for some of the FSB’s ongoing core financial reform efforts, including the area of shadow banking.

UK’s Financial Reporting Council Issues New UK Corporate Governance Code

by David Schwartz J.D. CPA | Sunday, September 21, 2014 | All, Change Overview and Rationale, Lender Directed Voting

The Financial Reporting Council (FRC), UK’s independent regulator responsible for promoting high quality corporate governance and reporting to foster investment, has issued a revised UK Corporate Governance Code. The changes to the Code are designed to strengthen the focus of companies and investors on the longer term and the sustainability of value creation. One aspect of this refocusing is shareholder engagement. The revised code seeks to ensure better communication between boards and shareholders by improving disclosure and transparency on proxy voting issues.

Trends in Foreign Exchange and Money Markets

by David Schwartz J.D. CPA | Friday, September 19, 2014 | All, Formal Regulatory Remedies

Since the financial crisis, both FX and money markets have undergone significant changes, driven primarily by increased self-regulation and the introduction of broad-ranging regulatory changes on both sides of the Atlantic. Peter Zöllner, the Head of the BIS Banking Department, has been keeping a close eye on these changes, and took the opportunity during the March 29, 2014 ACI Financial Markets World Congress 2014 in Berlin to update his audience on some of the major recent trends in the FX and money markets.

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