The Chairman of the CFTC, Gary Gensler, testified before the Senate Committee on Banking, Housing and Urban Affairs on May 22 on the progress of his agency’s regulatory reform of swaps. Gensler’s testimony included details on the CFTC’s plans for implementing these reforms cross-border.
On December 20, 2011, the Federal Reserve Board of Directors published its long awaited proposal on enhanced prudential standards and early remediation requirements. This proposal, required by the Dodd-Frank Act, would impose greater levels of regulation and supervision on:
In a December 23, 2011 approval order in connection with the proposed acquisition of RBC Bank (USA), a North Carolina based unit of Royal Bank of Canada, by The PNC Financial Services Group, Inc. includes the FRB’s first ever Dodd-Frank financial stability analysis. This analysis may serve as a model for how the FRB will determine going forward “the extent to which a proposed acquisition, merger, or consolidation would result in greater or more concentrated risks to the stability of the United States banking or financial system” now required under Dodd-Frank.
Section 3 of the Bank Holding Company Act, as amended by Dodd-Frank, prohibits the FRB from approving a merger, acquisition, or consolidation proposal that would result in a monopoly or would be in furtherance of any attempt to monopolize the business of banking in any relevant banking market.
At its January 11 meeting, the CFTC adopted final business conduct standards for swap dealers and major swap participants. These rules were proposed in December of 2010, and have garnered much attention and significant comment from the industry.
The Basel Committee on Banking Supervision has issued for consultation its revised Core Principles for Effective Banking Supervision. The consultative paper updates the Committee’s 2006 Core Principles document as well as the associated Core Principles Methodology, merging the two into a single comprehensive document. The revised set of twenty-nine Core Principles have also been reorganized to foster their implementation through a more logical structure, highlighting the difference between what supervisors do themselves and what they expect banks to do.
Treasury, the Fed, the FDIC, and the SEC have announced an extension of the comment period on the proposed regulations implementing the Dodd-Frank Act’s Volcker Rule provisions. Originally set to expire on January 13, 2012, the comment period has been extended a month until February 13, 2012.
On December 20, ISS published its white paper laying out in detail the pay for performance methodology it will implement under its 2012 policy updates. The goal of the white paper is to help both institutional clients and the companies in which they invest more fully understand ISS’ pay-for-performance methodology in advance of the 2012 proxy season.
In reaction to high volatility in the financial markets, on August 11, 2011, the Belgian Financial Services and Markets Authority (FSMA) banned shorts selling on of shares of certain Euronext Brussels listed banks and financial institutions. The FSMA also banned short selling of related derivatives.
In her December 15, 2011 address before the Transatlantic Corporate Governance Dialogue, SEC Chairman, Mary L. Schapiro, stated that in response to comments received on the Commission’s Proxy Plumbing concept release, the Commission is seriously considering providing guidance on how the federal securities laws should regulate the activities of proxy advisory firms. According to Schapiro, commenters on the concept release suggested that proxy advisory firms may interfere with, rather than enhance, the communication at the heart of effective engagement. The comments also reflect a level of frustration with the influence these firms have, accompanied by worries that they may not be accountable for, or even concerned with, the quality of the information on which they make voting recommendations.
The financial crisis has put a spotlight on the corporate governance structures of financial institutions, raising questions about whether the prevailing governance structures of banks are ineffective and whether implementing independence standards imposed by the Dodd-Frank Act, the Sarbanes-Oxley Act and the major stock exchanges will improve bank governance. A recently published paper by Renee Adams, Professor of Finance at the University of New South Wales, and Hamid Mehran of the Federal Reserve Bank of New York, attempts to answer to this question by examining the relationship between board composition and size and bank performance.