Category: All | Page 43

EC Cites Three Key Questions for Shadow Banking Regs

by David Schwartz J.D. CPA | Sunday, May 20, 2012 | All, Formal Regulatory Remedies

Shadow banking, i.e., credit intermediation outside the regular banking system, may represent the greatest challenge facing financial policy makers today. Since the G20 Summits in Seoul in 2010 and Cannes in 2011, regulators have struggled to envision the changes needed to reign in shadow banking practices. At an April 27 conference in Brussels, which was dedicated solely to shadow banking, the European Commission released a Consultation Paper with three questions intended to guide future regulation.

Breaking the Law of Unintended Consequences

by David Schwartz J.D. CPA | Saturday, May 19, 2012 | All, Formal Regulatory Remedies, Procedural Changes

The rush to reregulate the financial markets after the financial crisis understandably has many concerned about unintended consequences. Regardless of good intentions, the fixes put in place by legislators, central bankers, and regulators no matter how well thought out are bound to affect the complex and constantly evolving global financial markets in unanticipated ways. Professor Roberta Romano of the Yale Law School shares these worries and proposes in her latest paper, Regulating in the Dark, a mechanism for addressing and remediating the inevitable unintended consequences of hasty financial regulation.

U.S. Finalizes Stress Test Guidance for Largest Banks

by David Schwartz J.D. CPA | Thursday, May 17, 2012 | All, Formal Regulatory Remedies

The Federal Reserve Board, Federal Deposit Insurance Corporation, and the Office of the Comptroller of Currency have issued definitive guidance on supervisory expectations for stress testing by banking organizations with more than $10 billion in total consolidated assets. This set of interpretations is a final version of initial guidance issued June 15, 2011, and provides high-level principles for stress testing practices required of big banks and depository institutions. Overall, it “highlights the importance of stress testing as an ongoing risk management practice that supports a banking organization’s forward-looking assessment of its risks and better equips the organization to address a range of adverse outcomes.”

Basel Seeks Input on Trading Book Capital Requirements

by David Schwartz J.D. CPA | Monday, May 14, 2012 | All, Formal Regulatory Remedies

The Basel Committee on Banking Supervision is seeking comment on initial policy proposals emerging from the Committee’s fundamental review of trading book capital requirements The consultation paper contemplates a revised market risk framework and proposes specific measures intended to improve trading book capital requirements. These proposals also reflect the Committee’s increased focus on achieving a regulatory framework that can be implemented consistently by supervisors and which achieves comparable levels of capital across jurisdictions.

Comparing US and EU Derivatives Regulation Regimes

by David Schwartz J.D. CPA | Sunday, April 29, 2012 | All, Formal Regulatory Remedies

As a result of commitments made at the G20 in 2009, member states across the globe are engaging in a number of regulatory reform initiatives addressing derivatives. Though the G20 members agreed to some basic principles of regulation, and officials say that some level of cooperation and coordination is happening, the proposed regimes are not identical, and each may have extraterritorial effects. These new sets of rules and regulations emanating from each jurisdiction’s initiative may present some difficult compliance issues for end users of derivatives with global trading operations. Sidley & Austin has put together a report comparing and contrasting some of the provisions and new regulations under the US’s Dodd-Frank Act and those under the EU’s European Market Infrastructure Regulation (EMIR) and Markets in Financial Instruments Directive (MiFID II). This report should help clarify areas where compliance issues may arise for global traders.

Fed Sets Volcker Rule Phase-In

by David Schwartz J.D. CPA | Wednesday, April 25, 2012 | All, Formal Regulatory Remedies

On April 19, the Federal Reserve Board clarified that an entity covered by Volcker Rule will have the full two-year period provided by the statute to conform its activities and investments. The guidance issued by the Fed also assures covered entities and institutions that no activities or investments will be prohibited by the Volcker Rule until the end of the implementation period, currently scheduled to occur on July 21, 2014.

Bernanke: Shadow Banking Remains a “Key Vulnerability”

by David Schwartz J.D. CPA | Tuesday, April 24, 2012 | All, Change Overview and Rationale

In an April 13 address, Ben Bernanke, Chairman of the Board of Governors of the Federal Reserve System, made clear that he sees the system of shadow banking as a key vulnerability that makes another catastrophic economic crisis nearly inevitable. In Bernanke’s view, the increased importance of the so-called shadow banking system is the primary reason for the severity and pervasiveness of the financial crisis, and the regulatory gaps in which shadow banking activities operate must be addressed by policy makers.

FSB Takes Aim at Repo Funding

by David Schwartz J.D. CPA | Sunday, April 22, 2012 | All, Formal Regulatory Remedies

As capital requirements and structural reforms of banks and financial institutions fall into place, global financial regulators are renewing their efforts to bring shadow banking and securitized credit extension under some form of regulatory discipline. Though shadow banking has many facets needing attention, in an April 19 address at Johns Hopkins University, Lord Turner, head of the UK’s Financial Services Authority announced that regulation of repo funding mechanisms would be a priority for the Financial Stability Board this year, and in particular the FSB’s Standing Committee on Supervisory and Regulatory cooperation (SRC), of which he is the chair.

US and EU in Basel III Standoff

by David Schwartz J.D. CPA | Thursday, April 19, 2012 | All, Formal Regulatory Remedies

Citing the large volume of comments received in response to the proposed rules, on Nov. 9, 2012, the Federal Reserve Board, the OCC, and the FDIC announced in a joint release that proposed rules to implement the Basel III regulatory capital accords will not take effect on January 1, 2013.

LIBOR Banks Face a Hurricane of Litigation

by David Schwartz J.D. CPA | Thursday, April 19, 2012 | All

A storm, or more aptly, a hurricane of litigation is on its way for the banks involved in the LIBOR rate-rigging scandal. The LIBOR banks face not just the prospect of criminal prosecution, but also exposure to law suits by thousands of market participants and others who relied upon the key interest rate in transactions and financial products.

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