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

Strong and Lasting Recovery Depends on Successful Financial Reforms

by David Schwartz J.D. CPA | Sunday, February 12, 2012 | All, Change Overview and Rationale, Formal Regulatory Remedies

Dismissing calls to weaken or reconsider global financial reforms in the face of short-term setbacks in global recovery, Jaime Caruana, General Manager, Bank for International Settlements, argues that it is more important than ever to continue reforms and see through what has already begun. Caruana lays out in a recent address before the 2012 ADB Financial Sector Forum four principles he feels should guide these ongoing reform efforts.

K&L Gates’ Global Government Solutions 2012 Outlook

by David Schwartz J.D. CPA | Sunday, January 22, 2012 | All, Change Overview and Rationale, Formal Regulatory Remedies

K&L Gates’ 2012 Annual Outlook provides a valuable collection of articles that address important industry and regulatory trends and their correlation with government and political developments. This edition highlights regulatory issues in European Union countries, and also covers diverse topics such as: systemic financial risk regulation, anti-corruption and white-collar enforcement initiatives, tax policies, competition and antitrust law matters, intellectual property and international trade developments, energy and climate change, and health care and food safety laws.

Federal Reserve Proposes Enhanced Prudential Standards and Early Remediation Requirements

by David Schwartz J.D. CPA | Monday, January 16, 2012 | All, Change Overview and Rationale, Formal Regulatory Remedies, Procedural Changes

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:

Widening CDS Spreads Worry Global Financial Markets

by David Schwartz J.D. CPA | Monday, November 28, 2011 | All, Change Overview and Rationale

Over the past few months, spreads for credit default swaps (CDS) have widened quite dramatically. This is true for European sovereign CDSs as well as financial institutions, including those for US banks. For example, in September, the five-year CDS spread for Bank of America widened to 228 basis points from 297, and Citigroup’s hit 221, up from 204. Goldman’s was 227, up from 206.

SEC Chairman on the Challenges of Regulating Derivatives

by David Schwartz J.D. CPA | Thursday, November 24, 2011 | All, Change Overview and Rationale, Formal Regulatory Remedies, Procedural Changes

In a dialog at the Managed Funds Association Outlook 2011 seminar held in October between SEC Chairman Mary Schapiro, former SEC Chairman Harvey Pitt, and Managed Fund Association head, Richard Baker, Chairman Schapiro commented on the international and domestic challenges regulators face in coordinating the regulation of derivatives.

Domestically, coordination between the SEC and CFTC in the area of derivatives is critical because the agencies have different approaches to regulation, statutory authority, and the OTC derivatives markets they are charged with overseeing are not exactly the same. In addition, while the CFTC and SEC may effectively demarcate the types of OTC derivatives the oversee, the firms using these derivatives are not similarly demarcated. Differences in regulation between the two agencies may cause these firms difficulties.

Draft Volcker Rule Prompts Buyers’ Remorse

by David Schwartz J.D. CPA | Tuesday, November 22, 2011 | All, Change Overview and Rationale, Formal Regulatory Remedies, Procedural Changes

In a strongly worded letter to Federal Reserve Chair Ben Bernanke, Rep. Maurice Hinchey (D-NY), Rep. Peter Welch (D-VT), and 15 other House members urged the Fed and other federal regulators to reject the current draft of the Volcker Rule regulations and replace them with stronger language to prohibit commercial banks from engaging in investment activities. Citing the current version of the Volcker Rule as unnecessarily complex and filled with loopholes, the letter contends that the Fed’s current draft of the rules fails to protect bank deposits from risky trading activities and falls short of what the Dodd-Frank Act intends.

Model-Sensitive Disclosures Under Consideration

by David Schwartz J.D. CPA | Friday, October 28, 2011 | All, Change Overview and Rationale, Disclosure Regimes

In a forthcoming article in the Vanderbilt Law Review, Robert P Bartlett III, Assistant Professor of Law at the University of California, Berkeley, proposes a disclosure regime designed to enhance accurate pricing of a bank’s exposure to credit risk while at the same time safeguarding the confidentiality of a bank’s proprietary investment strategies and customer information. The article, Making Banks Transparent, begins from the premise that bank disclosures are notoriously lacking in granular, position-level information concerning their credit investments. Consequently, in times of market stress, investors must speculate as to which and to what extent banks maybe exposed, causing disruptions in credit markets and amplifying systemic risk. Bartlett proposes a mandatory disclosure regime based on credit modeling employing the very analytical tools banks themselves have developed and use to understand their own credit exposures.

Geithner: Shadow Banking Remains a Key Regulatory Target

by David Schwartz J.D. CPA | Friday, October 28, 2011 | All, Change Overview and Rationale, Procedural Changes

In his October 6, 2011 testimony before the before the US Congress’s Committee on Banking, Housing, and Urban Affairs, Treasury Secretary Timothy F. Geithner made it clear that shadow banking remains an an area of great concern on his regulatory agenda. Geithner testified that “shrinking the shadow banking system” is a major item in the Department of the Treasury’s recent regulatory successes. This testimony, coupled with his other recent statements makes it clear that that he hopes to see the shadow banking system further reduced.

Dodd-Frank Developments Affecting Swaps

by David Schwartz J.D. CPA | Wednesday, October 12, 2011 | All, Change Overview and Rationale, Formal Regulatory Remedies, Procedural Changes

For the most part, provisions of the Dodd–Frank Wall Street Reform and Consumer Protection Act (Pub. L. No. 111-203, H.R. 4173 (the Act) relating to derivatives are aimed at increasing transparency, altering clearing and exchange trading requirements, regulation of swap dealers and other swap market participants, restrictions on swaps trading by banks and associated increases in capital and margin requirements. The Act leaves many of the details of implementation to regulators. With over a year behind us, we can now reflect on what regulators have proposed, adopted, and left unfinished with regard to swaps.

Bank of England Examines Market Developments in Securities Lending

by David Schwartz J.D. CPA | Thursday, September 22, 2011 | All, Change Overview and Rationale, Disclosure Regimes

In their Quarterly Bulletin (Q3 2011), the Bank of England (BOE) examines the lessons the financial crisis revealed in the securities lending industry, as well as some of the more recent market driven and regulatory developments emerging to mitigate these risks. In particular, BOE voices a high level of concern over the risk of contagion arising from the interconnectedness between participants created by securities lending transactions, and the dangerous opacity of risks incurred across all participants prior to the financial crisis.

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Change Overview and Rationale