Formal Regulatory Remedies - Center for the Study of Financial Market Evolution (CSFME)

FSB Extends SIFI Framework to Certain Non-Banks

by David Schwartz J.D. CPA | Monday, February 17, 2014 | All, Change Overview and Rationale, Formal Regulatory Remedies

Creating a system of enhanced monitoring of systematic risk and supervision of systematically important financial institutions (SIFIs) is a key objective of global regulatory reform in the aftermath of the financial crisis. Having established criteria for determining the SIFI players in the banking and insurance sectors, the FSB and IOSCO have moved on to determining which non-banks and non-insurance companies may be considered SIFIs. In a January 8, 2014 consultative document, the FSB and IOSCO proposed a methodology for the identification of nonbank, noninsurance financial institutions (NBNI) that pose systemic risks to the global economy. The consultation document extends the framework already established to identify bank and insurance company SIFIs to all other financial entities.

European Commission Release: Establishing a Central Database for Secured Financing Transactions

by David Schwartz J.D. CPA | Thursday, January 30, 2014 | All, Change Overview and Rationale, Formal Regulatory Remedies

On January 29, 2014, the European Commission issued its long awaited proposal for the establishment of a central database for Secured Financing Transactions. This release is a part of a larger regulatory effort aimed at increasing the transparency of certain transactions in the shadow banking sector and to prevent regulatory arbitrage. The proposal aims to increase transparency in secured financing transactions, a term which is defined broadly to include repo, reverse repo, tri-party repo, securities lending transactions as well as total return swaps, collateral swaps and buy-sell transactions.

FSOC May Seek Better Regulation in Lieu of SIFI Designation for Asset Management Industry

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

In an apparent reaction to strong criticism from legislators, asset management industry groups, and even the Securities and Exchange Commission, the Financial Stability Oversight Counsel (FSOC) has indicated that it may encourage stronger regulation of the asset management industry, rather than designating certain industry participants as SIFIs. In the FSOC’s press release for its July 31, 2014 meeting, the Council indicated that it was encouraged by the new money market rules finalized by the SEC one week prior, and would take a step back to observe their effectiveness before moving forward with implementation of SIFI designations for asset managers and mutual fund groups.

Basel Issues Revisions to Its Securitization Framework

by David Schwartz J.D. CPA | Sunday, December 29, 2013 | All, Change Overview and Rationale, Formal Regulatory Remedies

The Bank for International Settlements has issued a second consultative paper on revisions to the Basel securitization framework. Following on their December 2012 proposal paper, this December 19, 2013 paper comprises a detailed set of proposals, including draft standards text, for a comprehensive revision of the treatment of securitisation within the risk-based capital framework.

IOSCO Releases Regulatory “Toolkit” for Retail Structured Products

by David Schwartz J.D. CPA | Sunday, December 22, 2013 | All, Change Overview and Rationale, Formal Regulatory Remedies

On December 30, 2013, the International Organization of Securities Commissions (IOSCO) published the final report on Regulation of Retail Structured Products, which provides a toolkit outlining regulatory options that securities regulators may find useful to regulate retail structured products. The toolkit was developed in response to to concerns from IOSCO members about the regulatory challenges these products pose, especially investor protection. In the aftermath of the Lehman bankruptcy, a number of regulatory approaches have been proposedto end irresponsible selling practices, rebuild investor confidence, improve overall transparency, and simplify unnecessary complexity.

ESMA Issues a Q&A on UCITS and ETF’s, But Sec Lending Questions Remain

by David Schwartz J.D. CPA | Thursday, December 19, 2013 | All, Formal Regulatory Remedies

Based on the European Securities and Markets Authority’s (ESMA’s) UCITS guidelines, which became effective in February, it was initially feared that asset managers would be required to return all revenues from securities lending to investors. Responding to these and other concerns about its UCITS and ETF guidance, ESMA issued a “frequently asked questions” document on April 12. These new answers, however, did not answer fully the concerns raised about securities lending, and left serious gaps in how the new guidelines are to be applied.

Board Approval Required to Take Advantage of Swaps End-User Exception

by David Schwartz J.D. CPA | Thursday, December 19, 2013 | All, Formal Regulatory Remedies, Procedural Changes

In their latest client memo, the Blank Rome law firm alerts directors and trustees of financial firms about their role in new swaps regulations. In particular, the firm puts public companies on notice that their boards must take action in order to take advantage of the CFTC’s end-user exception. The end-user exception for swaps frees certain swaps transactions from the new requirement that all swaps be centrally cleared.

Fed Gives Foreign Banks Parity with US Banks Under Swaps Push Out Rule

by David Schwartz J.D. CPA | Thursday, December 19, 2013 | All, Formal Regulatory Remedies

On June 5, 2013, the Federal Reserve Board issued interim final rules that grant foreign banks’ uninsured US branches and agencies access to the same swaps push out rules exemptions, transition period, and grandfathering provisions applicable to insured depository institutions.

New Multi-Agency Volker Rules Receive Mixed Reactions

by David Schwartz J.D. CPA | Thursday, December 12, 2013 | All, Formal Regulatory Remedies

On December 10, 2013, five federal agencies issued final rules developed jointly to implement section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Volcker Rule”). The final Volker Rules prohibit FDIC insured depository institutions and companies affiliated with insured depository institutions from engaging in short-term proprietary trading of certain securities, derivatives, commodity futures and options on these instruments, for their own account.

A Resilient UK Financial Sector Requires a Global Focus

by David Schwartz J.D. CPA | Wednesday, October 30, 2013 | All, Change Overview and Rationale, Formal Regulatory Remedies

R]eforms of domestic banking are far from sufficient for a global hub like London. Now is the time for a greater focus on what’s needed for resilient international banking and robust global markets.

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Formal Regulatory Remedies