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

Taiwan Moves to Discourage Short Selling and Securities Lending

by David Schwartz J.D. CPA | Saturday, February 19, 2011 | All, Formal Regulatory Remedies, Procedural Changes

Taiwan has recently taken steps to curb short selling and securities lending to address extreme share price volatility. In an effort to stabilize equity markets, Taiwan’s Financial Supervisory Commission on November 21 set a new daily limit on short selling of stocks. According to the new daily cap, only 20 percent of average trading volume in the last 30 sessions could be used for short-selling. The previous rules permitted short-selling of up to 3 percent of the company’s total outstanding shares.

In addition, regulators called Taiwanese insurance companies and state pension funds directly to urge them to stop lending securities to short sellers and asked securities borrowers to return their loaned shares in a bid to reduce the volume of short selling and prevent further volatility in share prices.

BOE’s Paul Fisher Examines Tail Risks and Contract Design

by David Schwartz J.D. CPA | Saturday, February 19, 2011 | All, Change Overview and Rationale, Disclosure Regimes

In a September 1, 2011 speechat Clare College in Cambridge, Paul Fisher, Executive Director for Markets of the Bank of England, outlined his thoughts on ways risk taking is executed and how contracts between parties assuming these risks can have “a profound impact on systematic stability beyond the normal consideration of formal regulations.”

FSB Task Force Issues Recommendations for Shadow Banking Regulation

by David Schwartz J.D. CPA | Saturday, February 19, 2011 | All, Change Overview and Rationale, Formal Regulatory Remedies, Procedural Changes

At the request of the G20, a Financial Stability Board task force (Task Force) has published recommendations to strengthen the oversight and regulation of the shadow banking system. As we discussed in our April 28, 2011 post, “FSB Task Force Frames the Regulation of Shadow Banking,” the FSB formed a task force (Task Force) whose primary goal is to develop recommendations to strengthen the regulation and oversight of the shadow banking system by mid-2011.

This report follows an April 12, 2011 document, “Shadow Banking: Scoping the Issues,” clarify what is meant by the “shadow banking system” and set the stage for public comment and regulatory tracking.

Shadow Banking Sector Exceeds PreCrisis Levels

by David Schwartz J.D. CPA | Wednesday, January 19, 2011 | All, Change Overview and Rationale

FSB data published in its October 27, 2011 report, Shadow Banking: Strengthening Oversight and Regulation, reveals that among the eleven largest economies with significant shadow banking, the shadow banking sector has surpassed the levels prior to the financial crisis.

September 2011 Basel Committee Recap

by David Schwartz J.D. CPA | Wednesday, January 19, 2011 | All, Change Overview and Rationale, Formal Regulatory Remedies, Procedural Changes

At its September 28, 2011 meeting, the Basel Committee (the “Committee) approved a range of measures aimed at finalizing the Committee’s July 2011 consultative document, “Global systemically important banks: Assessment methodology and the additional loss absorbency requirement.” The document sets out the Committee’s proposal on the assessment methodology for (1) determining global systemic importance, (2) determining the magnitude of additional loss absorbency that global systemically important banks should have, and (3) proposes the arrangements by which the methodologies will be phased in.

Reinventing the Banking Social Contract

by David Schwartz J.D. CPA | Wednesday, January 19, 2011 | All, Change Overview and Rationale, Procedural Changes

In a June address before the British Bankers’ Association Annual International Banking Conference in London, Paul Tucker, Deputy Governor for Financial Stability at the Bank of England, explained his thoughts on redrawing the social contract between banking and society in light of the contract’s failure leading up to and during the financial crisis. According to Mr. Tucker, the traditional social contract wherein bank regulation is balanced against insulation from certain market risks through industry-wide deposit-insurance programs and state sponsored measures to reduce the probability of unwarranted failure is now deeply fractured.

Basel III Implementation Progress Report

by David Schwartz J.D. CPA | Wednesday, January 19, 2011 | All, Change Overview and Rationale, Formal Regulatory Remedies

On October 18, the Basel Committee issued a report documenting Basel Committee members’ progress in adopting Basel II, Basel 2.5 and Basel III as of September 2011. The report provides a high level summary of the the status of domestic legislative and rule-making intended to incorporate the Committee’s capital standards into national law or regulation according to the internationally agreed time frames.

Policy Intervention may be needed to Protect Investors

by David Schwartz J.D. CPA | Sunday, December 19, 2010 | All, Disclosure Regimes, Formal Regulatory Remedies

According to the Bank of England, “The lasting legacy of this crisis is too much debt held by too many sectors against too little capital.” A McKinsey study found that, since 2000, gross debt for the ten largest economies grew by US$40 trillion, or a rise of 60%. Bank leverage soared to as much as 50 times equity, as compared with a ratio of less than 10 at the start of the 20th Century. This is not sustainable, say financial regulators.

Infrastructures must become more resilient

by David Schwartz J.D. CPA | Sunday, December 19, 2010 | All, Disclosure Regimes, Formal Regulatory Remedies

Organized exchanges and central counterparty structures are expected to lower the threat from opaque, concentrated trading networks.

Better Hedge Fund Data can Help To Inform Legislative Actions

by David Schwartz J.D. CPA | Friday, November 19, 2010 | All, Disclosure Regimes, Procedural Changes

Legislators will be better equipped to enact appropriate reforms if their deliberations are based on meaningful data regarding hedge funds. IOSCO: IOSCO believes that regulators should seek to develop a comparable and consistent set of data to be collected from local hedge fund managers and advisers to monitor systemic risks and prevent gaps in regulatory reporting requirements. We recognise that the legislative process is ongoing in many jurisdictions and their outcomes could further influence the information needed to monitor systemic risk in the hedge fund sector, as well as who collects the data. Nonetheless, setting out these categories of information may help regulators in the assessment of systemic risk and help to inform the relevant legislative debates.

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