Change Overview and Rationale - Center for the Study of Financial Market Evolution (CSFME)

Dodd-Frank Implementation: Are We At the End of the Beginning, or the Beginning of the End?

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

With the Dodd-Frank Wall Street Reform and Consumer Protection Act having just celebrated its fourth birthday, where exactly are we in the the reform of our seemingly ever-evolving regulatory framework? In a recent paper, Dan Ryan, Chairman of the Financial Services Regulatory Practice at PricewaterhouseCoopers LLP takes a look at this very question to help us determine what is imminent, what is delayed, and what remains in limbo with regard to Dodd-Frank implementation.

OFR Annual Report Warns of Lingering Threats to Financial Stability

by David Schwartz J.D. CPA | Tuesday, December 16, 2014 | All, Change Overview and Rationale, Formal Regulatory Remedies

In its most recent Annual Report, the Office of Financial Research (OFR) warns that despite the strengthening global financial system, threats to financial stability still remain, and it is no time for complacency. Formed in 2010 as a part of the Treasury Department under a mandate in the Dodd-Frank Act, the OFR is charged with improving the quality of financial data available to policymakers and to facilitate more robust and sophisticated analysis of the financial system. As part of its mission, in an annual report to Congress, the OFR analyzes potential threats to U.S. financial stability, documents significant progress in meeting the mission of the Office, and reports on key research findings.

G20 Brisbane Meeting Promises Focus on Resilient Financial System

by David Schwartz J.D. CPA | Tuesday, November 25, 2014 | All, Change Overview and Rationale, Procedural Changes

With the conclusion of their November 15 and 16 meeting in Brisbane, the G20 has published their official communiqué outlining the group’s progress, plans, and areas of focus. Financial regulatory reform remains the central focus of G20 activities. However, with the slow global recovery and disappointing job growth, the G20 announced that they expect to emphasize expanding the financial sector’s role in building a stronger and more sustainable global economy. The overall thrust of the G20’s Brisbane communiqué is that critical work remains to build a stronger, more resilient financial system. Over the next year, the group intends to continue to finalize the various elements of its policy framework that remain open, fully implement financial regulatory reforms already agreed upon, and be vigilant for new risks and unexpected consequences.

Global OTC Working Group Updates the G20

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

The G20’s meeting in Brisbane begins tomorrow, and international working groups have been burning the midnight oil to have their progress reports ready in time. One such group, the OTC Derivatives Regulator Group (ODRG)*, issued a report on November 7 that provides an update to the G20 Leaders regarding the ODRG’s continuing effort to identify and resolve cross-border issues associated with the implementation of the G20 OTC derivatives reform agenda. The report reflects how the ODRG has addressed, or intends to address, cross-border issues identified since the publication of the report published in advance of the St. Petersburg Summit in September 2013.

Tarullo: Liquidity Regulation Today and Tomorrow

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

The financial crisis of 2007-08 was a crisis of liquidity. Facing deep uncertainty about the condition of counterparties and the value of collateral assets, investors refused to offer new short-term lending or even to roll over existing repos and similar extensions of credit. As a result, many funding markets ground to a halt.

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.

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.

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.

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

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.

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Change Overview and Rationale